LIBRARY 

Of  THE 

UNIVEJCkliY  Of  liliNOte 


iiAiisiiGAL  mmm, 

JUH  6 1905 


g*n  Mje  &npvexnv  ®<m*t  the  &tat*&. 


October  Term,  1903. 


ill.  Library 

' No.  277. 


The  Northern  Securities  Company,  The  Great 
Northern  Railway  Company,  The  Northern 


The  United  States, 


respondent. 


RAILWAY  “MERGERS”  OPERATING  A SUBSTANTIAL  DIVISION  OF  TERRITORY 
THE  RESULT  OF  AN  IRRESISTIBLE  TREND  OR  TENDENCY  IN  RAILWAY 
DEVELOPMENT— THEIR  INEVITABILITY  AS  DISCLOSED  IN  THE 
HISTORY  OF  RAILWAY  COMBINATION  AND  AMALGAMATION 
THROUGHOUT  THE  WORLD  — THEIR  CONSONANCE  WITH 
PUBLIC  POLICY — THEIR  ECONOMIC  VALIDITY- 
CONSTITUTIONAL  CONSIDERATIONS. 


ARGUMENT  AMICUS  CURIAE . 


Charles  F.  Beach,  Jun., 


Pioneer  Press  Building , 

St.  Paul,  Minnesota. 


Return  this  book  on  or  before  the 
Latest  Date  stamped  below. 

Theft,  mutilation,  and  underlining  of  books 
are  reasons  for  disciplinary  action  and  may 
result  in  dismissal  from  the  University. 
University  of  Illinois  Library 


JAH  -2  19bf 


MAV  6 

APR  1 7 


8 1966 


1978 


1978 


. 


£>OLV~Us<o  "XVu^ 


|*tt  tty*  ®ou  rt  x*f  tft*  !|(nit£t>r  gtat*** 

October  Term,  1903. 


The  Northern  Securities  Company,  The  Great 
Northern  Railway  Company,  The  Northern 
Pacific  Railway  Company,  and  Others, 

appellants, 

v. 

The  United  States, 

RESPONDENT. 


ARGUMENT  AMICUS  CURIAE. 


STATEMENT. 


*71 


Whatever  may  turn  out  to  be  the  technical  legal 
quality  or  character  of  the  Northern  Securities  Company 
in  respect  of  its  promotion,  organization  and  operation, 
as  it  may  ultimately  be  fixed  by  the  final  judgment  of 

V 

this  court,  or,  in  other  words,  whatever  it  may  at  the  end 

.A 

<5~~be  held  to  be  as  matter  of  law — and  putting  that  ques- 
— tion  and  those  considerations  quite  aside  for  the  mo- 
ment— it  is  a fact,  which  sufficiently  appears  in  the  rec- 
ord and  out  of  it,  that  what  was  sought  to  be  accom- 
plished and  all  that  <ds  actually  accomplished  through 
ijtt®  Northern  Securities  Company  is  a unity  of  inter- 


2 


est  between  the  owners  of  two  lines  of  railway  doing 
business  mainly  in  the  same  territory.^  There  has  been 
brought  about  a community  of  interest  between  the 
owners  of  what  the  Circuit  Court  found  to  be  two 
heretofore  rival  and  competing  lines , growing  out  of 
the  ownership  by  the  Northern  Securities  Company  of 
a majority  of  the  shares  of  the  two  companies.  ^ The 
creation  of  the  Northern  Securities  Company  was  de- 

A ff — 

signed  to  place  and  does  place  the  ownership  of  these 
shares  in  a single  interest,  and  it  was  no  doubt  de- 
signed to  make  for  and  certainly  does  make  for  economy 
in  the  operation  of  the  properties.  Whatever  else  it  may 
be  and  whatever  else  it  may  do,  it  certainly  is  and  does 
that.  When  we  eliminate  the  rhetoric  on  the  one  hand 
and  the  explanation  on  the  other,  this  stands  out  as  the 
one  essential  fact. 

Furthermore,  it  also  appears  in  the  record  that  the 

A shareowners  scheme  put  into  effective  operation  through  the  North- 

arrangement 

fnter  sese.  ern  Securities  Company  is  an  arrangement  entirely  be- 
tween the  owners  of  two  formerly  rival  and  competing 
lines  of  transcontinental  railway,  and  not  between  the  two 
companies,  or  between  them  and  the  public.  In  other 
words,  it  is  a sort  of  an  indirect  corporate  arrangement 
between  the  shareowners  of  two  railway  companies,  and 
is  strictly  inter  sese . ^It  affirmatively  appears  that  neither 
railway  company  is  a party  directly  or  indirectly  to  it; 


3 

and  it  does  not  appear  that  the  scheme  in  operation  inter- 
feres with,  affects,  abridges  or  takes  away  any  right  which 
any  member  of  the  public  has,  or  ever  had,  to  fair  treat- 
ment at  the  hands  of  either  company  as  a common 
carrier,  or  that  it  has  or  can  have  any  tendency  so  to 
do,  unless  the  mere  ownership  of  the  shares  of  the  two 
companies  be  held  to  be  a direct  restraint  of  trade. 
Neither  does  it  appear  to  curtail,  limit  or  emasculate, 
to  any,  even  the  slightest,  extent,  any  right  which  any 
shipper  or  other  person  has,  or  ever  had,  to  invoke  the 
aid  of  the  courts  if  and  when  they  are  injured  by  any 
default  or  wrong-doing  on  the  part  of  either  company./ 
^None  of  the  rights  of  the  public  is  effected  one  way 
or  the  other  by  the  arrangement.  ,\The  two  railways  are 
just  as  much  bound  as  they  ever  were  to  perform  all  their 
duties  to  the  public;  and  they  are  just  as  liable  as  they 
ever  were  to  suit  at  the  hands  of  any  patron  or  other  person 
whom  they  may  wrong  or  injure  in  any  personal  or  proper- 
ty right.  They  are  each  of  them  also  and  equally  as  much 
holden  as  ever  to  perform  all  their  duties  to  the  State  and 
to  the  General  Government.  They  are  as  much  as  ever  the 
subjects  of  governmental  regulation — State  and  Federal 
— as  to  the  rates  they  may  charge  for  the  service  they 
render,  and  as  to  the  manner  in  which  such  service  is  to 
be  performed.  ' It  does  not  appear  that  the  arrangement 
in  question  was  designed,  or  could  have  any  tendency  if 


4 


designed,  to  shield  or  protect  either  of  the  companies 
as  common  carriers  in  respect  of  any  duty  owed  by  either 
of  them  to  anyone,  or  that  in  fact  it  has  or  can  have  any 
effect  upon  any  of  their  relations  either  to  the  people  or 
to  the  State  or  to  the  Federal  Government,  unless  it  be 
held  that  this  ownership  of  the  shares  of  the  two  com- 
panies is  in  and  of  itself  a suppression  of  competition,  and 
to  that  extent  such  restraint  of  trade  as  is  forbidden  by 
the  Sherman  law. 

The  public  no!  The  public  still  has  in  full  every  remedy  it  ever  had  for 
affected. 

any  wrong  it  may  ever  suffer;  and  the  plenary  powers 
of  the  State  and  of  the  Federal  Government  to  control 
the  operation  and  management  of  the  two  railways  in  all 
respects,  as  provided  by  law,  is  in  no  degree  abridged^ 
The  position  of  the  two  companies,  qua  the  people  and 
qua  the  government,  is  exactly  what  it  was  before  the 
Northern  Securities  Company  was  organized,  except 
upon  the  theory  of  the  effect  of  the  ownership  of  the 
shares  just  referred  to,  and  unless  the  power  incident  to 
the  ownership  of  a majority  of  the  shares  is  in  se 
restraint  of  trade.  ^ It  does  not  appear  that  either  the 
people  or  the  government  are  put  in  a worse  position 
by  the  arrangement,  but  it  does  affirmatively  appear 
that  the  owners  of  the  property  are  put,  or  believe 
they  are  put,  in  a better  financial  position.  In  other 
words,  no  outside  interest  is  affected,  and  the  owners  of 
the  two  lines  are,  or  think  they  are,  benefited. 


5 

Under  present  conditions  in  the  United  States  there 
can  be  no  competition  among  railways  helpful  in  any  way 
to  the  public.  The  law  taken  in  connection  with  the  sys- 
tem of  joint  tariffs  universally  in  force  between  connect- 
ing lines  now  renders  all  that  legally  and  actually  impos- 
sible. Every  duty  which  it  has  been  thought  the  railways 
of  the  country  owe  the  public  is  expressly  declared  and 
enjoined  upon  them  by  the  Interstate  Commerce  law  and 
its  amendments.  This  statute,  for  example,  requires  the 
publication  of  rates,  prohibits  their  change  without  notice, 
makes  unlawful  a greater  charge  for  a shorter  than  for 
a longer  distance,  forbids  pooling  and  discrimination  in 
every  form,  etc.,  etc.  There  are  similar  local  laws  in  each 
of  the  States;  and  Commissions,  State  and  Federal,  every- 
where see  to  their  due  enforcement.-  Competition  between 
railways,  therefore,  in  any  real  sense,  as  affecting  shippers^ 
is  now  as  impossible  with  us  as  anything  well  can  be,  be- 
cause railways  are  not  allowed  to  do  anything  in  favor  of 
one  shipper  as  against  another  which  amounts  to  competi- 
tion. Declamation  about  securing  by  statute  or  judicial 
decision  a free  and  unlimited  competition  between  parallel 
and  competing  lines,  so  that  all  the  interests  of  the  public 
may  be  sacredly  safeguarded,  et  cetera , et  cetera , is,  conse- 
quently, mere  cajolery — something  to  catch  and  mislead 
the  unthinking.  It  is  heard  mostly  about  election  times, 
as  a shibboleth  of  party  politics. 


Legal  compe- 
tition practically 
eliminated. 


i 


A fi nancial 
arrangement. 


6 

The  arrangement  sought  to  be  invalidated  by  this  suit 
being,  therefore,  one  between  shareowners  niter  sese,  and 
not  affecting  either  the  two  railway  companies  or  the  pub- 
lic or  the  government,  is  entitled  upon  this  appeal  to  an 
adjudication  in  the  light  of  these  facts.  • If  it  be  a fact 
that  the  existence  of  the  Northern  Securities  Company 
and  what  it  accomplishes  does  not  diminish  or  curtail  any 
of  the  rights  of  the  public  to  good  and  efficient  railway 
service ; and  if  it  be  a fact  that  the  two  railway  companies, 
as  servants  of  the  public,  are  as  much  as  ever  obliged  to 
do  their  whole  duty  to  the  public  as  their  patrons,  and 
are  as  much  as  ever  subject  to  suits  and  actions  at  law 
if  they  fail  therein;  if  the  arrangement  in  question  does 
not  make  suits  against  them  more  difficult,  or  in  any  way 
Operate  to  complicate  or  restrain  the  action  of  the  law 
against  them;  if  it  does  not  diminish  or  take  away  any 
fight  of  the  public,  or  augment  any  privilege  of  the  com- 
mon carrier ; if  as  public  carriers  and  public  servants  they 
are  no  better  off,  and  if  their  patrons  as  shippers  are  no 
worse  off;  if  finally  all  these  rights,  duties  and  relations 
are  unaffected  one  way  or  the  other  by  the  arrangement, 
then  the  Northern  Securities  Company  is  entitled  to  an 
adjudication  at  the  bar  of  this  Court  without  reference  to 
such  rights,  duties  and  relations,  and  to  stand  or  fall  on 
its  merits,  as  a modern  scheme  or  method  of  American 
railway  regulation,  supervision  and  control  on  the  finan- 


7 

cial  side.  In  that  state  of  case  and  upon  that  hypothesis 
it  is  competent  to  eliminate  from  the  problem  all  these 
extraneous  and  ulterior  considerations,  to  reduce  the 
rhetoric  of  the  subject  to  its  lowest  terms,  to  disregard 
the  special  pleading,  to  have  regard  as  much  as  possible 
to  the  larger  equities  of  the  situation,  and  to  consider 
the  scheme  of  the  Northern  Securities  Company  along 
financial  and  practical  lines. 

It  is  very  respectfully  urged  that  it  will  not  be  unwise 
for  this  Court  thus  to  consider  this  transaction  at  large 
and  as  a whole,  and  on  its  economic  as  well  as  on  its  legal 
side.  ^If  it  be  possible  to  believe  that  the  possession  of 
the  bare  power  incident  to  the  ownership  of  a majority  of 
these  shares — the  mere  right  or  the  exercise  of  the  right 
to  vote  upon  them — constitutes  in  some  way  and  in  some 
legal  sense  some  such  restraint  of  trade  as  is  forbidden  by 
the  statute  invoked,  it  will  be  many  times  easier  to  believe 
that  such  an  indirect,  intangible  and  shadowy  restraint* 
(whatever  it  is,  at  the  most)  is  nothing  and  quite  fit  to  be 
disregarded  as  compared  to  the  benefits  to  the  real  par- 
ties in  interest,  which  are  asserted  to  arise  from  the 
arrangement — as  compared  to  the  economies  which  it 
works,  the  stability  of  ownership  which  it  secures, 
the  maintenance  of  the  status  quo , the  orderly,  con- 


*“If  shape  it  might  be  called  that  shape  had  none 
Distinguishable  in  member,  joint  or  limb.” 


Essentially 
an  economic 
question 


8 

catenations  and  prudent  operation  of  the  financia 
affairs  of  the  two  companies,  and  the  consequent  obvious 
advantages  to  the  owners  of  the  properties  without  any , 
even  the  slightest , offset  by  way  of  disadvantage  to  the  public . 
If  it  have  much  sound  economic  value  along  these  lines, 
and  otherwise,  as  in  the  judgment  of  the  owners  of  the 
two  properties  it  seems  to  have,  that  may  be  sufficient  in 
this  court  to  outweigh  whatever  trifling,  fanciful  or  tech- 
nical objection  may  be  possible  to  be  urged  to  it  on  strictly 
legal  grounds.  It  is  matter  of  common  knowledge  that 
men  in  these  days  of  keen  competition  in  business  enter 
into  combinations — form  partnerships  or  “mergers” — in 
order  to  get  and  to  increase  trade,  not  to  restrain  it,  to 
build  up  and  not  to  pull  down  the  general  commercial  pros- 
perity of  the  community. 

It  is  the  more  reasonable  for  us  to  ask  consideration  of 
the  questions  involved  on  this  appeal  along  these  lines, 
because’^at  bottom  the  larger  issues  in  this  case  are  eco- 
nomic more  than  legal,  and,  when  the  extraneous  issues 
are  eliminated,  the  real  question  is  in  fact  essentially 
economic,  because  it  appears  that  the  arrangement  at- 
tacked in  this  suit  affects  the  internal  and  not  at  all  the 
external  affairs  of  the  two  companies^/ [It  touches  the 
interests  of  the  shareowners  of  two  private  corporations, 
and  not  the  interests  of  the  railway  companies  as  common 
carriers.  iUpon  further  consideration  it  may  seem  to  be  a 


9 

combination  in  restraint  of  waste  more  than  one  in  re- 
straint of  trade)'  It  was  conceived  and  promoted  to  facili- 
tate the  financial  operation  of  the  two  properties,  and  to 
work  economics  in  the  management  of  the  two  lines,  pri- 
marily and  as  far  as  appears,  solely  in  the  interest  and  for 
the  pecuniary  benefit  of  the  owners.  That  was  a lawful 
purpose  and  it  was  economically  a sound  purpose. 
Whenever,  if  ever,  what  is  done  in  this  direction  goes 
beyond  that  and  injuriously  affects  any  outside  inter- 
est— public  or  private — the  shipper  or  the  State,  then  and 
then  only  it  becomes  unlawful,  and  then  and  then  only  it 
is,  as  in  any  other  case  of  wrongdoing  by  anybody,  ob- 
noxious to  legal  proceedings  in  the  proper  tribunal.  But 
that  would  be  another  story,  and  that  is  not  this  case. 

SYNOPSIS  OF  ARGUMENT. 

I shall  in  this  argument  discuss  four  propositions  which 
taken  together  comprehend  the  view  I seek  to  present, 
and  which  seem  to  me  to  cover  the  ground  upon  this  par- 
ticular phase  of  the  controversy: 

First:  Such  arrangements  between  railway  owners  as 
that  effected  through  the  Northern  Securities  Company 
are  the  result  of  an  irresistible  trend  or  tendency  in  rail- 
way development  everywhere,  and  are  inevitable. 

Second:  They  are,  therefore,  not  contrary  to  public 
policy,  and  it  is  open  to  this  Court  so  to  adjudicate  upon 
this  appeal. 


10 


Third:  They  have  not  in  the  past  been,  and  cannot  in 
the  future  be,  at  all  prevented  by  adverse  legislation  or 
Judicial  decision. 

Fourth:  Any  statute  which  opposes  itself  to  such  a 
trend  01  tendency  in  railway  development  is  economically 
unsound.  Such  unsoundness  is  not  to  be  presumed  of 
any  general  federal  statute;  and  when  one  construction 
of  such  a statute  opposes  it  to  such  trend  or  tendency, 
while  another,  equally  open  to  the  Court,  puts  it  in  har- 
mony therewith,  the  Court  is  remitted  to  the  latter  con- 
struction. 

That  is  the  case  as  I conceive  it. 

ARGUMENT. 

I. 

These  “mergers”  operating  a substantial  division  of 
territory  are  the  result  of  an  irresistible  trend  or  tendency 
in  railway  development  everywhere,  and  are,  therefore,  in- 
evitable. 

This  proposition,  put  forward  as  the  statement  of  a fact 
m railway  history,  is  either  true  or  false;  and  its  truth  is 
to  be  tested  by  an  appeal,  seriatim,  to  the  history  of  rail- 
ways and  railway  development  in  each  of  the  chief  coun- 
tries in  the  world.  I shall  devote  no  time  to  the  history 
of  railway  consolidation  in  this  country,  because  whatever 


II 


the  Court  may  not  be  assumed  to  take  judicial  notice  of 
within  the  limits  of  its  own  jurisdiction,  seems  to  have 
been  carefully  compiled  and  made  a part  of  the  record 
upon  this  appeal. 

The  promotion,  organization  and  existence  of  the 
Northern  Securities  Company  is  a phase  or  manifestation 
of  a world-wide  tendency  to  combine  and  consolidate  rail- 
way lines  operating  in  the  same  territory.  This  tendency 
manifests  itself  in  every  country  in  the  world  of  any  com- 
mercial consequence  where  there  are  railways,  and  most 
strongly  in  those  countries  which  exhibit  the  highest  and 
most  complicated  commercial  development.  Sometimes 
it  takes  one  form  and  sometimes  another,  but  it  every*- 
where  exists  as  a dominating  and  controlling  force  in 
railway  economics.  The  practical  result  sought  to  be  ac- 
complished by  the  formation  of  the  Northern  Securities 
Company  is  found  to  differ  in  no  material  respect  or  de- 
gree from  what  is  done  and  accomplished  in  railway 
management,  operation  and  control — in  one  way  or  an- 
other— in  almost  every  state  in  the  Union  and  in  every 
considerable  country  on  the  globe  where  there  are  rail- 
ways. Mergers  of  parallel  and  competing  lines  of  railway 
— in  one  shape  or  another — so  as  to  operate  as  a substan- 
tial division  of  territory  between  independent  companies, 
are  a natural  and  absolutely  inevitable  result  of  the  normal 
growth  and  development  of  that  modern  scheme  of  trans- 


An  economic 
evolution. 


12 


portation  by  rail  lines  which  obtains  everywhere.  They 
are  arrangements  of  universal  and  world-wide  acceptance, 
validity,  utility  and  inevitability.  The  history  of  the  mat- 
ter throughout  the  world  in  detail  fully  supports  this 
proposition. 

First,  then,  let  us  consider  the  history  of  railway  con- 
struction and  consolidation  in  England  and  France,  and 
then  on  the  Continent  of  Europe  generally,  and  elsewhere. 
I commence  with  the  English  railways  only  because  they 
are  the  best  illustration  of  the  truth  of  the  propositions 
I have  laid  down;  and  because  our  case  in  the  United 
States  is  most  like  theirs  in  England.  Our  methods  and 
mistakes  in  railway-making  have  unfortunately  been  much 
the  same  as  theirs — haphazard,  competitive  and  waste- 
ful. France  is  properly  considered  next,  because  the 
French  lines  are  the  best  examples  of  sound  methods  in 
railway  building  and  financiering,  and  in  their  govern- 
mental regulation  and  control — or,  in  other  words,  of  how 
to  do  it,  as  these  in  England  are  of  how  not  to  do  it. 
The  sharp  contrast  is,  therefore,  instructive.  Railway 
experience  elsewhere  in  the  world,  to  which  less  detailed 
attention  is  given,  emphasizes,  however,  the  truth  for 
which  I here  contend. 


English  railways  In  February,  1872,  a Select  Joint  Committee  on  Rail- 
way Companies  Amalgamation  was  appointed  by  the  two 


13 

Houses  of  the  English  Parliament  to  investigate  and  re- 
port back  the  condition  of  the  railways  of  Great  Britain, 
particularly  in  respect  of  the  consolidation  of  lines  and 
the  division  of  territory  among  the  greater  companies. 

Mr.  Chichester  Fortescue,  in  moving  the  appointment  of 
the  Select  Committee  in  the  House  of  Commons,  on  Feb- 
ruary 23,  1872,  said  that  “twenty  years  ago  a Committee 
had  reported  against  the  system  of  amalgamation,  but  since 
that  Committee  reported  amalgamation  had  gone  on  as 
merrily  as  before — the  fact  being  that  5,000  miles  of  rail- 
way had  been  added  to  the  greater  railways  since  that 
time.”  (209  Hansard’s  Parliamentary  Debates,  943.) 

This  Committee  called  a great  number  of  witnesses  and  Report  of  the 

Committee  of 

went  fully  into  the  details  of  the  matter  throughout  the  1872. 

British  Islands,  and  on  August  2,  1872,  presented  a vol- 
uminous report,  from  which  it  appeared  that,  from  the 
commencement  of  railway  construction  in  England  down 
to  the  time  of  that  report,  Parliament  and  the  English 
courts  had  united  in  efforts  to  prevent  the  consolidation 
of  independent  railway  companies  in  that  country,  wholly 
without  success.  The  facts  reported  by  the  Committee 
disclosed  that  by  the  end  of  the  year  1843  seventy-one 
separate  and  independent  lines  had  been  constructed, 
averaging  about  thirty  miles  each  in  length.  During  the 
following  year  the  average  mileage  per  independent  line 
was  reduced  one-half,  so  that  by  the  end  of  the  year  1844 


14 

the  average  was  only  about  fifteen  miles.  Between  1844 
and  1847,  six  hundred  and  thirty-seven  separate  companies 
had  been  chartered,  with  a total  authorized  length  of  about 
9,400  miles  of  line.  Eleven  proposals,  for  example,  were 
made  to  Parliament  for  lines  of  railway  through  a single 
narrow  valley,  where  but  one  line  was  possible. 

This  impossible  and  uneconomic  condition  called  so 
loudly  for  relief  that  consolidation  began  about  1847,  an<3 
go  proceeded,  by  the  gradual  absorption  of  the  smaller 
lines  by  the  larger  systems,  and  by  a consequent  division 
of  territory  between  the  consolidated  companies,  that  by 
1872  it  had  come  to  pass  that  the  railway  business  of  the 
Kingdom  was  substantially  performed  by  no  more  than 
about  six  of  these  great  amalgamated  companies. 

The  first  English  railway  charters  contained  provisions 
intended  to  prevent  competition  both  between  the  lines 
themselves  and  between  them  and  the  canals,  especially 
in  freight  traffic.  George  Stephenson,  the  father  of  En- 
glish railways,  seems  to  have  appreciated  clearly  the  mis- 
chief to  be  avoided  in  the  matter  of  competition,  even  at 
that  early  day,  and  he,  therefore,  set  himself  to  the  task 
of  getting  the  railway  system  in  that  country  started  right 
in  this  particular.  His  view  on  this  subject  was  summed 
Up  in  his  much-quoted  saying  that  “where  combination  is 
possible,  competition  is  impossible.” 


i5 

In  1836,  a Mr.  Morrison,  M.  P.,  from  Inverness,  made 
a remarkable  speech  in  Parliament,  in  the  course  of  a dis- 
cussion of  the  then  English  railway  situation,  in  which  he 
pointed  out  with  uttermost  clearness  that  a railroad  must 
in  the  nature  of  things  be  a monopoly;  that  competing 
roads  will  inevitably  combine ; that  parallel  lines  are  sheer 
waste  of  capital,  and  that  fixed  maximum  rates  are  useless. 
(33  Hansard’s  Parliamentary  Debates,  977  et  seq.) 

This  utterance  is  the  more  remarkable  because  it  stated 
clearly,  at  the  outset  of  railway  building  and  before  there 
was  any  basis  of  fact  and  experience  upon  which  to  found 
such  generalization,  the  ultimate  principles  which  long 
experience  has  since  demonstrated  to  be  sound. 

Thus  it  is  seen  that  the  English  railways  started  right; 
but  that  they  soon  got  wrong,  and  for  the  first  thirty  years 
and  more  blunders  in  plenty  were  made  in  futile  endeavors 
to  construct  and  operate  railroads  on  the  principle  of  inter- 
competition. Uncounted  treasure  was  wasted  in  these 
attempts,  and  absolutely  nothing  but  experience  was 
gained  by  it.  By  1872  competition  had  been  substantially 
eliminated  through  the  operation  of  natural  laws  and  in 
spite  of  hostile  legislation  and  litigation.  It  was  said  in 
Parliament,  in  the  debates  over  the  appointment  of  the 
Select  Committee  in  1872,  that  there  was  not  at  that  time 
a single  competitive  rate  existing  in  the  Kingdom.  With 
the  legislation  of  1873  the  general  railway  situation  in 


Settlement  of 
the  question  !n 
England. 


Summary  of 
the  English  po- 
sition, 


16 

England  was  fixed  and  determined,  and  the  fatuous  agita- 
tion for  competition  ended.  The  railways  ceased  to  be 
bugbears,  and  fears  of  mischief  to  the  public  from  the 
growth  of  railway  influence  and  power  gave  place  to  intel- 
ligent criticism  of  railway  methods  and  to  a public-spirited 
determination  to  get  good  service  at  fair  rates  while  giv- 
ing the  companies  a free  hand  to  manage  their  finances  in 
their  own  way.  Thus,  after  nearly  forty  years  of  experi- 
ment, agitation  and  disturbance,  the  English  people  came 
back  about  1872  to  their  point  of  commencement.  Mr. 
Adams,  in  his  “Railroads  and  Railroad  Questions,”  says 
that  then  England  “settled  down  on  the  doctrine  of  laisses 
faire and  President  Hadley,  in  his  “Railroad  Trans- 
portation,” says  “It  might  better  be  said  that  it  has  settled 
down  on  the  policy  of  specific  laws  for  specific  troubles.” 
By  about  1872,  as  we  thus  see,  the  problem  was  solved 
by  the  operation  of  immutable  economic  laws,  and  the 
decision  against  competition  between  lines  made  beyond 
all  possibility  of  reversion. 

To  make  a summary  statement  and  to  bring  it  quite 
down  to  date,  it  appears  that  in  1847  there  were  about 
5,000  miles  of  railway  in  England,  owned  and  operated 
by  several  hundred  independent  and  competing  compa- 
nies; twenty-five  years  later  there  were  13,000  miles  of 
railway,  owned  and  operated  by  twelve  partly  competing 
companies;  now  there  are  a little  over  15,000  miles,  owned 


17 

and  operated  by  about  six  non-competing  companies. 
(Pendleton’s  Our  Railways,  their  Origin,  Development, 
Incident  and  Romance  (London  1896);  Paish’s  The  Brit- 
ish Railway  Position,  (London,  The  Statist,  1902).) 

What  the  English  people  would  have  saved  in  squan- 
dered capital  and  wasted  effort,  if  they  had  not  abandoned 
the  sound  economic  principles  upon  which  they  began  to 
construct  and  finance  their  railways,  and  to  which  they 
ultimately  returned,  are  sums  too  vast  for  computation. 
The  futile  effort  to  preserve  the  principle  of  competition 
between  railways  in  England  was  the  costliest  blunder  ever 
made  outside  of  America  in  any  single  business  matter  by 
any  people  on  the  earth  since  time  began.  It  was  a form 
of  insanity  which  Americans  might  well  have  avoided, 
and  it  is  a sort  of  politico-mental  disorder  that  American 
courts  are  not  well  employed  in  fostering  and  promoting. 

Let  us  take  up  the  history  of  some  of  the  greater  English 
companies  a little  in  detail.  The  London  & North- 
Western  Railway  was  first  opened  for  traffic  in  1837,  about 
a month  after  the  accession  of  Queen  Victoria.  In  1846, 
it  consisted  of  a main  line  from  London  to  Birmingham, 
with  some  insignificant  branches.  In  1852,  a writer  on  the 
position  of  the  company  complains  that  it  “fell  a few  years 
back  into  the  error  generally  committed  by  railway  com- 
panies of  amalgamation  with  numerous  other  railway 
companies.  From  being  a line  from  London  to  Birming- 


The  London  & 
Northwestern 
lino. 


The  Great 
Western  tine. 


The  North- 
Eastern  line. 


18 

ham  112^  miles,  it  has  become  a line  or  lines  of  539J  miles 
long — five  times  its  original  length/’  Since  that  time  it 
has  increased  its  mileage  nearly  four-fold,  and  has  merged 
into  its  system  the  Chester  and  Holyhead  lines  on  the 
West  and  the  Lancashire  and  Carlisle  on  the  North,  be- 
sides numerous  smaller  undertakings  too  numerous  to 
mention.  (Stevens’  Investment  & Speculation  in  British 
Railways,  79,  80.) 

The  Great  Western  Railway  has  been  absorbing  smaller 
independent  lines  in  its  territory  for  many  years,  and 
altogether  considerably  more  than  100  have  been  so  ab- 
sorbed within  the  last  forty  years.  Since  1896  it  has  taken 
over  about  20  such  lines,  adding  thereby  260  miles  to  its 
system.  Of  its  total  capital  expenditure  from  1892  to 
1901,  amounting  to  about  15^  millions  sterling,  nearly  5 
millions  represented  amalgamations. 

The  North-Eastern  Railway  is  a consolidation  of  various 
small  lines  which  has  resulted  in  a vast  net  work  of 
railway  in  the  Northeast  of  England  without  a single  in- 
truder in  the  territory  in  the  shape  of  a competitor.  The 
report  of  the  Select  Committee  on  Railway  Amalgama- 
tion in  1872  contained  the  following  reference  to  this  line: 

“The  case  of  the  North-Eastern  is  a striking  illus- 
tration. That  railway  or  system  of  railways  is  com- 
posed of  thirty-seven  lines,  several  of  which  formerly 


19 


competed  with  each  other.  Before  their  amalgama- 
tion they  had,  generally  speaking,  high  rates  and 
fares,  and  low  dividends.  The  system  is  now  the 
most  complete  monopoly  in  the  United  Kingdom; 
from  the  Tyne  to  the  Humber,  with  one  local  excep- 
tion, it  has  the  county  to  itself,  and  it  has  the  lowest 
fares,  and  the  highest  dividend  of  any  large  English 
railway.  It  has  had  little  or  no  litigation  with  other 
companies.  Whilst  complaints  have  been  heard 
from  Lancashire  and  Yorkshire,  where  there  are  so- 
called  competing  lines,  no  witness  has  appeared  to 
complain  of  the  North-Eastern;  and  the  general 
feeling  in  the  district  it  serves  appears  favorable  to 
its  management.” 

The  Great  Central  Railway  which  was  opened  for  all  Th®  Great  Cen- 
tral line. 

classes  of  traffic  in  April,  1899,  has  a total  mileage  of  665 
miles.  Of  this  mileage  465  belongs  to  it  and  200  are 
jointly  owned  with  other  companies.  In  addition,  the 
company  owns  111  miles  of  canals  and  tramways.  It  Is, 
therefore,  a system  essentially  made  up  of  joint  lines  and 
canals.  It  is  also  the  newest  line  in  England,  and  may 
stand  for  the  most  recent  type  of  development  in  that 
country.  (Stevens’  Investment  & Speculation  in  British 
Railways,  114,  115.) 

Mr.  Yerkes  and  Mr.  Morgan,  working  independently  for 


20 


London  un-  the  time  being,  are  revolutionizing,  consolidating  and  re- 

derground  lines. 

building  the  antiquated  system  of  underground  railway 
in  London,  and  are  thus  correcting  the  faulty  competitive 
construction  and  operation  of  these  lines  hitherto.  Their 
efforts,  which  are  for  the  present  sharply  competitive,  are 
working  harmony  between  the  former  conflicting  and  com- 
peting interests,  and  are  bringing  order  and  system  out 
of  the  old  antagonism  and  confusion.  Much  new  mileage 
and  greatly  improved  facilities  are  and  are  to  be  the  result. 
It  now  seems  certain  that  in  no  very  long  time  all  inter- 
mural transit  in  London  which  is  wholly  or  partly  under- 
ground, aggregating  nearly  225  miles  in  length,  will  be 
consolidated  into  no  more  than  two  great  substantially 
non-competing  enterprises,  dividing  the  territory  in  a way 
between  them,  upon  a line  (roughly  speaking)  which  runs 
northwest  and  southeast  through  Piccadilly  Circus,  or 
dividing,  along  non-competitive  lines  as  much  as  possible, 
about  Piccadilly  Circus  and  converging  severally  therein. 
The  Joint  Parliamentary  Committee  of  1901  reported  that 
it  was  desirable  that  the  working  of  underground  railways 
in  and  around  London  should  be  put  under  the  control  of 
some  one  consolidated  interest;  and  if  we  read  into  the 
future  of  these  underground  lines  the  railway  experience  of 
the  past  in  England  above  ground,  that  is  sure  to  be  the 
ultimate  solution. 

We  consider  in  another  place  the  recent  amalgamation 


21 


of  the  South-Eastern  and  Chatham  lines ; and  at  this  point 
it  may  be  stated  that  the  absorption  of  small  undertakings 
by  the  larger  railway  systems  has  been  continuously  in 
progress  in  England,  and  is  still  proceeding. 

The  French  railway  system  was  developed  a little  later  French  railways 
than  the  English,  but  we  must  look  as  far  back  as  the  reign 
of  Louis  XI,  in  the  latter  part  of  the  fifteenth  century,  if 
we  are  fully  to  understand  and  appreciate  that  develop- 
ment. That  sagacious  and  masterful  prince,  who  reigned 
from  1461  to  1483,  broke  effectually  the  power  of  the  great 
feudatories,  and  by  a consolidation  of  authority  in  the 
crown  laid  the  foundation  of  the  absolute  monarchy.  His 
taking  the  postal  service  out  of  the  hands  of  the  feudal 
authorities  and  away  from  the  cities  and  making  it  a matter 
of  national  administration,  these  four  hundred  years  ago 
and  more,  was  one  of  the  most  notable  acts  of  his  reign, 
and  was  in  a way  the  first  step  toward  the  modern  railway 
system  of  France.  “Modern  history,”  says  President  Had- 
ley, in  speaking  of  the  nationalization  of  the  French  post- 
office,  “ — the  history  of  nations  as  such — may  almost  be 
said  to  have  begun  at  this  point.” 

What  Louis  XI  did  for  the  power  of  the  crown  and  for 
the  postal  service  of  the  country,  Louis  XIV  and  Colbert 
did  in  laying  the  foundation  of  the  national  system  of  high- 
roads and  canals.  The  Ecole  des  Pouts  et  Chaussees  was 


22 


founded,  and  trained  engineers  graduated  therefrom  laid 
out,  constructed  and  perfected  that  splendid  system  of 
canals  and  highways,  radiating  from  Paris  and  reaching 
every  corner  of  the  Kingdom,  which  long  ago  made  France 
the  first  country  in  the  world  in  its  roads  and  waterways. 
There  was  from  the  beginning  complete  organization, 
intelligent  survey  and  construction  and  strict  supervision; 
so  that  an  almost  perfect  system  of  lines  of  communication 
existed  in  France  before  railways  were  known.  In  no 
other  country  had  such  results  been  accomplished  in  road- 
making, and  nowhere  else  was  such  completeness  of  or- 
ganization and  development  possible.  The  genius  of  high- 
ways had  in  some  sort  come  down  to  France  as  an  inherit- 
ance from  Rome,  whose  military  roads  were  one  of  her 
most  characteristic  monuments. 

In  this  state  of  case,  with  a perfect  system  of  roads  and 
canals  already  built  and  in  operation — which  made  railways 
seem  less  necessary  in  France  than  in  other  countries — it 
is  not  strange  that  the  French  built  railways  slowly  and 
cautiously.  So  it  was  not  merely  accidental  that  France 
moved  tardily  in  this  matter.-  It  is  not  in  the  French  char- 
acter to  make  radical  changes,  or  to  do  things  piecemeal; 
and  it  was  easy  for  her  highway  engineers  to  see  that  other 
nations  were  blundering  in  their  first  railway  construction. 
The  racial  qualities  that  distinguish  the  French,  their  spirit 
of  order  and  economy,  their  notion  of  proportion,  and  the:r 


23 

conservative  good  sense  in  business,  all  had  something  to 
do  with  their  making  haste  slowly  in  railway  building. 

It  is  very  much  the  French  way  to  let  other  people  make 
the  initial  experiments  in  new  things,  and  only  to  take  a 
thing  up  when  h is  demonstrably  sound  and  feasible.  It 
is  almost  a racial  instinct,  and  this  is  what  happened  in  the 
development  of  French  railways. 

The  result  is  that  they  now  possess  the  only  railway  sys-  Th«  Frencli 

plan. 

tern  in  the  world  which  was  intelligently  conceived  from 
the  outset  as  a unit,  which  was  scientifically  planned  and 
laid  down  by  competent  engineers  working  together  to  a 
common  end.  and  which  was  built  as  a whole.  The  condi- 
tions in  France  that  made  this  possible  had  their  genesis 
in  the  dominating  sagacity  and  spirit  of  order  of  Louis  XI. 

The  highways  and  canals  led  up  to  the  railway  lines,  and 
fhe  governmental  regulation  and  control  of  the  old  land 
and  waterways  grew  naturally  into  the  present  system  of 
railway  supervision.  The  system  of  roads  and  waterways 
existing  in  1830  suited  the  French  nation  exactly.  They 
were  so  arranged  and  classified  that  each  bore  its  exact 
proportion  of  importance,  whether  national,  departmental 
or  local.  They  were  regulated  from  Paris  with  ease  and 
with  military  precision.  Never  was  there  so  efficient  a 
corps  of  engineers  for  carrying  out  such  a scheme  as  that 
which  is  trained  at  the  Ecolc  dcs  Pouts  et  Chaussccs. 

The  first  step  taken  by  the  government  looking  to  a 


24 

general  railway  system  was  the  appropriation  of  a sum  of 
money  to  pay  the  government  engineers  for  laying  out  a 
general  system  of  railway  lines  covering  the  whole  of 
France.  When  this  survey  was  completed,  and  while  the 
lines  existed  only  on  the  maps  and  blue-prints  of  the  engi- 
neers, the  government  next  took  up  the  question  of  owner- 
ship and  management.  While  other  countries  had  been 
acting  and  experimenting  and  making  costly  mistakes, 
France  had  been  reasoning  and  thinking  the  matter  out. 
There  was  a long  series  of  debates  in  Parliament  between 
1837  and  1840.  The  plan  finally  adopted  was  the  concep' 
tion  of  Thiers,  and  was  settled  upon  in  1842.  The  plans  then 
and  thus  deliberately  conceived  and  matured — both  of  en- 
gineering and  of  legislation — have  since  been  carried  ou| 
consistently. 

They  were  sufficiently  elastic  to  be  practicable.  It  waf 
at  the  outset  a policy  of  support  and  control  without 
actual  ownership,  or,  in  other  words,  a policy  of  subsidies 
to  encourage  private  companies,  and  in  return  for  these 
subsidies  a reservation  of  more  or  less  important  rights 
of  State  control.  As  the  work  proceeded  and  as  new  con- 
ditions arose,  amendments  and  modifications  were  incor- 
porated into  the  plan  as  originally  conceived.  In  184^ 
it  was  strictly  a plan  for  subsidies;  in  1852,  extensions 
of  chartered  privileges  were  granted  to  the  companies;  ’n 
t859,  a scheme  for  the  guarantee  of  interest  on  the  bonds 


25 

was  inaugurated,  and,  in  1883,  the  government  guarantee 
was  extended  to  dividends. 

Under  the  plan  adopted  thirty-three  different  companies 
were  chartered,  contemplating  about  2,500  miles  of  line.  Franco- 
Building  went  on  rapidly  until  the  Revolution  of  1848, 
and  then  again  after  the  accession  of  Napoleon  III  in 
1851.  The  lines  have  from  the  beginning  been  laid  down 
with  the  idea  of  avoiding  all  duplication  and  all  waste  of 
capital;  they  were  surveyed  and  traced  by  government 
engineers,  and  each  part  stood  in  its  proper  and  intelli- 
gent relation  to  the  whole.  Parallel  lines  were  forbidden 
as  a matter  of  course,  and  competition  was  not  conceived 
of  as  among  the  possibilities  of  the  situation.  By  1852 
the  number  of  independent  systems  had  been  reduced  from 
thirty-three  to  eleven,  and  in  1859  the  eleven  were  reduced 
to  six,  of  which  five  radiated  from  Paris.  Each  had  a 
monopoly  in  its  own  territory.  Competition  running  riot, 
the  construction  of  needless  lines  as  a mere  speculation  in 
the  securities,  rate  wars  with  their  attendant  iniquities, 
and  the  consequent  wanton  w^aste  of  money  and  effort 
in  construction  and  operation  are  essentially  unthinkable 
to  a French  railway  engineer  or  official.  New  construc- 
tion is  undertaken  only  as  required,  and  to  meet  the  neces- 
sities for  more  lines  growing  out  of  the  development  of 
any  particular  territory. 


26 

About  1859  it  became  obvious  that  a considerable 
amount  of  new  construction  was  necessary  in  order  to 
bring  the  railway  system  up  to  a proper  standard  of  utility 
and  efficiency,  and  in  order  to  secure  this  construction, 
each  of  the  six  companies,  and  each  in  its  own  district, 
undertook  to  construct  a large  number  of  branch  lines. 
The  government  took  the  initiative,  and  in  order  to  facili- 
tate this  new  work  and  to  secure  it  promptly  recourse  was 
had  to  a system  of  State  guarantees  of  interest  on  the 
bonds  upon  which  the  money  for  the  new  construction 
was  to  be  raised.  This  was  the  plan  devised  by  De  Franc- 
queville.  Money  was,  of  course,  easily  raised  by  issues 
of  bonds  upon  which  the  government  guaranteed  4 per 
cent,  this  guarantee  making  the  securities  instantly  mar- 
ketable and  extremely  valuable.  There  was,  accordingly, 
no  wasteful  financiering,  no  iniquitous  jobs,  no  lack  of 
funds,  no  foreclosures,  no  reorganizations,  receiverships  or 
squeezing  of  investors. 

In  1865  a further  plan  was  proposed  in  the  Chamber 
for  the  construction  of  a net  work  of  local  roads  not  to 
belong  to  the  six  companies,  and  the  municipal  authori- 
ties were  given  the  right  to  subsidize  such  lines.  Pur- 
suant to  this  plan,  several  thousand  miles  of  these  local 
lines  were  built  throughout  the  country  within  the  next 
five  years.  It  was  not,  however,  contemplated  th^t  they 
should  be  combined  into  systems  which  might  interfere 


27 

in  any  way  with  the  monopoly  of  the  six  companies.  They 
were  designed  to  be  feeders.  However,  after  the  war  of 
1871,  the  prohibition  to  combine  was  successfully  evaded, 
and  these  local  lines  by  a series  of  combinations  began  to 
be  serious  competitors  in  many  places  to  the  main  systems. 
This  made  it  necessary  for  the  government  to  take  the 
matter  again  in  hand,  and  the  problem  was  ultimately 
solved  by  having  the  great  companies  take  over  the  local 
lines  within  their  territories  severally,  upon  terms. 

In  1879,  by  a decree  of  July  of  that  year  in  the  Chamber 
of  Deputies,  De  Freycinet  undertook  to  raise  a loan  of 
three  thousand  millions  of  francs  for  the  construction  of 
about  10,000  miles  of  additional  line.  This  plan  has  been 
slowly  carried  out  since  that  time.  There  was  at  first  some 
delay,  but  by  the  beginning  of  1884  this  last  comprehen- 
sive scheme  of  railway  development  was  settled  upon,  the 
leading  points  of  which  were  these:  first,  that  the  State 
hereafter  should  confine  its  own  railway  operations  to  the 
small  district  in  the  Southwest  occupied  by  what  is  known 
as  the  State  line ; that  isolated  lines  which  the  State  owned 
in  various  parts  of  the  country  should  be  taken  over  by 
that  one  of  the  six  great  companies  in  whose  territory  it 
lay;  second,  that  additional  lines  as  needed  should  in 
future  be  constructed  only  by  the  companies  111  whose  dis- 
trict they  belong;  third,  that  the  State  should  guarantee 
each  company  a minimum  dividend,  and  that  when  the 


Recent  French 
financiering 


28 

amount  available  for  dividends  exceeded  a certain  per- 
centage— the  rate  differing  for  each  line — two-thirds  of 
the  excess  should  go  to  the  State.  The  limit,  however, 
was  placed  so  high  that  this  provision  has  been  practically 
inoperative.  Thus,  for  example,  on  the  Northern  line,  the 
guarantee  minimum  dividend  is  13.5  per  cent,  while 
the  point  beyond  which  the  State  shares  the  excess  is 
22.1  per  cent.  In  the  case  of  the  Paris,  Lyons  & Medi- 
terranean, the  guarantee  minimum  is  11  per  cent,  the 
State  sharing  in  anything  beyond  15  per  cent,  and  so  on, 
with  slightly  lower  percentages  for  the  other  companies. 

All  of  the  lines  in  France  with  one  exception  are 
owned  and  operated  by  private  companies.  They  are 
concedes  and  become  state  property  upon  the  expiration 
of  the  concessions.  Meantime  they  are  subject  to  a strict 
governmental  supervision  and  control.  The  length  open 
for  traffic  on  December  31,  1901,  was  23,880  miles,  which 
fully  meets  all  the  requirements  of  the  country.  The  orig- 
inal scheme  was  for  the  government  to  contribute  about 
250,000  francs  per  mile;  and  private  enterprise  to  find 
about  200,000  francs  per  mile,  thus  dividing  the  expense 
and  the  ownership.  The  concessions  generally  were  to 
fall  in,  first  in  about  forty  and  later  on  in  ninety-nine  years. 
When  this  occurs — about  the  middle  of  the  present  cen- 
tury— the  government  will,  it  is  claimed,  become  pos- 
sessed of  an  asset  in  the  shape  of  railway  property  suffi- 


29 

dent  in  realizable  value  to  pay  off  in  full  the  national 
debt.  In  1892  the  French  railways  were  conservatively 
valued  at  16,000  millions  of  francs.  The  original  plans  of 
construction  and  joint  ownership  were  somewhat  modi- 
fied as  time  ran  on.  (Thery’s  Histoire  des  grandes  com- 
pagnies  des  Chemins  de  fer  frangais  (Paris,  1894).) 

In  the  construction  of  the  French  lines  there  has  been 
less  waste  of  capital  and  better  results  for  capital  than  else- 
where in  the  world.  French  railways  have  cost  less  and 
come  to  more  than  any  others  on  earth.  It  need  not  be 
argued  that  the  French  scheme  put  in  practice  would 
inevitably  reduce  the  cost  of  construction  to  a minimum 
and  would  secure  the  best  results  for  the  least  money. 
Passing  by  the  matter  of  the  State  guarantee  of  interest 
and  dividends,  it  may  be  said  that  the  net  earnings  of  the 
six  private  companies  have  been  upon  an  average  far  be- 
yond anything  accomplished  elsewhere  in  the  world  in 
that  respect  from  railway  operation.  Furthermore,  in 
face  of  the  strong  position  of  the  French  railways  as 
monopolies,  the  government  notwithstanding  exercises  a 
sufficient  control — one  which  is  in  many  respects  admira- 
ble. No  other  country  has  in  its  civil  service  such  a body 
of  trained  engineers  and  inspectors,  and  nowhere  else  are 
things  done  so  well  along  these  lines  as  in  France. 

A comparison  of  the  rates  charged  by  French  railways 
with  those  of  other  continental  countries  or  with  England 


Economics  of 
the  French 
scheme. 


French  rates 
and  service 


30 

are  not  unfavorable  to  the  French  system.  They  are, 
speaking  generally,  lower  than  our  rates  in  this  country 
for  passengers  and  higher  for  freight,  but  that  is  because 
a great  majority  of  the  passenger  traffic  is  what  we  know 
as  third  class,  and  because  there  is  comparatively  little 
long-distance  freight  traffic.  President  Hadley  has,  how- 
ever, wisely  said:  “The  average  rates  per  ton-mile  are 
anything  but  an  infallible  sign  concerning  a railroad’s  wis- 
dom or  a State’s  prosperity.”  (Railroad  Transportation, 
202.)  And  nothing  is  more  certain  than  that  rates  may 
be  too  low  as  well  as  too  high,  having  regard  both  to  the 
well-being  of  the  carrier  and  to  the  best  ultimate  interests 
of  the  public  served  by  that  carrier.  The  monopoly  does 
not  work  extortion  in  rates,  and  it  does  not  prevent  proper 
governmental  regulation. 

Coming  to  the  quality  of  the  service  rendered,  the 
French  lines  compare  well  with  the  best  in  ol/ier  countries. 
Their  freight  and  military  service  is  not  inferior  to  that 
of  any  other  nation;  and  their  passenger  service  is  the 
fastest  and  most  luxurious,  as  well  as  the  most  comforta- 
ble and  satisfactory,  in  Europe.  The  greater  number  of 
experienced  travelers  will,  I think,  pronounce  it,  upon  the 
whole,  the  first  passenger  service  in  the  world.  The  lines 
out  of  Paris,  south  and  north,  in  speed  and  luxury  proba- 
bly have  no  equals  anywhere. 


3i 

The  French  plan,  as  is  seen,  forces  the  numerous  inde- 
pendent companies  to  work  in  harmony  with  one  another, 
while  giving  each  of  them  an  absolute  monopoly  in  their 
own  territory.  It  renders,  therefore,  the  process  of  con- 
solidation within  that  territory  easy  and  inevitable.  What- 
ever slight  attempts  have  been  made  in  the  Chamber  to 
check  or  prevent  combination  or  monopoly  have  been 
promptly  overruled  as  contrary  to  the  general  scheme. 
This  was  particularly  the  case  in  1875,  when  Phillipparfc, 
a Belgium  capitalist,  undertook  to  consolidate  the  local 
lines  as  against  the  six  companies ; and  even  the  State  itself 
in  the  operation  of  its  own  lines  in  the  Southwest  has  never 
succeeded  in  breaking  into  the  monopoly  of  the  Orleans 
Company  in  that  territory.  While  France  prohibits  ef- 
fectively competition  between  her  railway  lines,  she  is  con- 
stantly spending  large  sums  in  improving  internal  water 
communication;  and  private  carriers  using  these  water- 
ways without  paying  any  toll  carry  off  more  or  less  traffic 
from  the  railways,  and  are  allowed  to  do  so. 

To  make  a summary  statement,  we  find  the  facts  to  be 
that  in  France  the  railway  system  was  intelligently  planned 
as  a unit  from  the  outset;  that  the  lines  were  laid  down 
by  competent  government  engineers  and  constructed  with- 
out paralleling;  that  in  consequence  very  little  money  was 
wasted  in  construction ; that  competition  did  not  enter  into 
the  scheme  as  originally  devised,  and  that  when  it  arose — 


Summary  of 
the  French  po- 
sition. 


32 

notably  through  the  consolidations  of  the  net  work  of  local 
lines  built  between  1865  and  1870 — it  was  suppressed  by 
the  government;  that  railway  investments  have  been  al- 
most uniformly  profitable,  and  upon  the  whole  much  more 
profitable  than  in  other  countries;  that  freight  rates  are 
not  excessive  and  that  passenger  rates  are  very  low ; that 
the  public  is  well  served,  the  passenger  service  especially 
being  of  the  very  best;  that  governmental  regulation  is 
not  hampered  or  thwarted  by  the  strength  of  the  railways 
as  monopolies;  that  no  mischief  and  much  good  seems 
to  have  come  from  the  elimination  of  competition  between 
lines,  and  that  upon  the  whole  the  French  scheme  secures 
a maximum  of  adequate,  efficient  and  satisfactory  service 
at  a minimum  of  cost  and  friction.  (Picard’s  Lcs  Chemins 
de  fcr  franqais  (Paris,  1884);  Ch.  Gomel  on  the  railways 
of  France  from  a historical,  statistical  and  economic  point 
of  view,  with  discussions  of  railroads  in  other  parts  of  the 
world,  in  the  Nouveau  dictionnairc  d'economie  politique,  of 
Leon  Say  and  Joseph  Chailley,  10th  ed.,  Vol.  1,  (Paris, 
1900).) 

Ah,  but  some  mocker  will  say,  “it  is  all  very  well  for  you 
to  talk  about  French  railway  administration,  and  its  excel- 
lence, and  all  that;  but  all  such  things  are  contrary  to 
our  American  idea  of  liberty — quite  contrary,  don’t  you 
know,  to  the  genius  of  our  Anglo-Saxon  civilization,”  etc., 
etc.  However  expressed  that  will  perhaps  be  some  man’s 


33 

thought;  it  often  is,  when  it  is  said  that  “they  do  these 
things  better  in  France.”  Now  the  short  and  ready  an- 
swer to  all  such  stuff  is  that  it  is  imported  and  decadent 
twaddle — a phantasm  fit  only  for  boys  while  they  are 
Sophomores,  or  for  old  ladies  gossiping  over  their  tea 
cups.  It  is  not  a man’s  size  in  this  country.  To  talk 
about  the  “genius  of  our  civilization” — whatever  that  is — 
as  a supposable  justification  or  palliation  of  haphazard  and 
wasteful  methods  in  the  development  of  our  railway  sys- 
tem, or  to  regard  “Anglo-Saxon”  notions  and  misconcep- 
tions— whatever  they  may  be — as  in  some  vague  and  in- 
definable way  a sound  basis  for  a differentiation  of  our 
railway  methods  from  those  of  the  French  is  mere  im- 
becility. It  is  impossible  to  believe  that  grown  men  in 
the  twentieth  century,  confronted  with  a real  problem, 
will  give  it  a moment’s  consideration.  The  question  is  not 
whether  it  is  Gallic  or  Saxon,  but  whether  it  is  good  or 
bad ; not  whether  it  is  Latin,  but  whether  it  will  work.  If 
the  French  are  in  possession  of  any  communicable  sanity 
on  railroad  problems,  we  want  the  benefit  of  it.  It  is  a poor 
enough  excuse  for  slovenly  methods  that  we  have  moved 
along  sound  “Anglo-Saxon”  lines,  as  if  there  were  some 
sanctity  about  mistakes  because  they  are  laid  to  racial 
defects.  All  such  rubbishy  talk  is  either  the  stupidest 
provincialism,  or  it  is  the  intellectual  refuge  of  men  too 
lazy  or  too  dull  to  think  connectedly  on  these  questions. 


Rail  ways 
Belgium . 


34 

We  had  much  better  be  sane  than  “saxon”  in  regulating 
our  railways,  and  we  may  well  eliminate  all  considerations 
of  racial  difference,  so  far  as  they  are  not  imaginary,  in 
looking  the  railway  problem  squarely  in  the  face.  We  had 
better  learn  where  and  how  we  can,  and  reap  as  much  as 
possible  full  benefit  from  the  experience  of  every  country 
on  the  planet  where  railway  administration  is  sound  and 
successful. 

in  The  policy  of  government  ownership  is  perhaps  best 
typified  by  the  Belgian  system.  Of  all  countries  in  the 
world  Belgium  probably  offered  the  best  field  for  a State 
railroad.  The  country  is  small,  compact  and  rich,  the 
population  crowded,  active  and  intelligent,  and  the  indus- 
tries varied,  all  which  insured  a large  volume  of  local  traffic. 
Moreover,  Belgium  is  on  the  highway  between  England 
and  Germany,  so  that,  in  addition  to  a dense  local  traffic, 
the  Belgian  lines  were  certain  to  secure  considerable 
through  traffic  on  commodities  moving  between  England 
and  Germany.  There  was  in  consequence  of  all  this  little 
room  for  mistake  in  locating  the  main  lines,  and  they  were, 
as  in  France,  for  the  most  part  laid  down  intelligently  and 
built  economically. 

Railroad  construction  began  as  early  as  1833.  Private 
companies  were  allowed  to  build  lines  wherever  the  State 
did  not  choose  to  build,  but  competition  between  the  lines 


35 

owned  by  private  companies  and  the  State  lines  was  not 
at  any  time  part  of  the  original  scheme.  Like  the  French, 
the  Belgians  saw  from  the  start  that  competition  would  be 
uneconomic  and  wasteful.  The  private  railways  increased 
rapidly  from  200  miles  in  1850  to  700  miles  in  i860,  and 
1,400  miles  in  1870.  This  rapid  growth  of  the  private  lines 
was  accompanied  by  their  inevitable  consolidation  into 
systems,  and  in  spite  of  the  fact  that  competition  had  not 
been  contemplated,  there  began  in  Belgium  about  1856 
a period  of  railroad  war  between  the  State  and  the  private 
lines  and  among  the  private  lines  themselves.  Theoretic- 
ally, the  State  had  and  exercised  the  power  to  forbid  the 
private  companies  from  entering  into  any  competition  with 
the  State  lines,  but,  in  spite  of  that,  competition  in  Bel- 
gium after  about  1856-57  was  keen.  The  State  had  the 
better  routes  and  in  some  sort  the  inside  track,  but  some 
other  advantages  possessed  by  the  private  companies  prac- 
tically offset  this  advantage. 

This  competition  working  the  usual  mischief  finally 
drove  the  government  to  the  expedient  of  buying  out  the 
private  companies.  This  began  about  1870.  By  1874,  the 
government  owned  more  than  half  the  mileage  of  the 
country.  By  1880,  it  owned  two-thirds,  and  in  1902,  there 
were  2,516  miles  of  railway  in  the  country,  all,  or  prac- 
tically all,  of  which  is  controlled  by  the  State,  either 
through  ownership  or  lease,  and  competition  is  in  conse- 


36 

quence  wholly  eliminated.  The  State  now  owns  more 
than  70  per  cent  of  the  total  mileage,  and  operates  almost 
all  of  the  remaining  30  per  cent  by  lease. 

This  is  in  brief  the  history  of  the  development  of  rail- 
ways in  Belgium.  It  appears  that  competition  was  not 
part  of  the  original  scheme ; that  it  nevertheless  arose  and 
ran  its  course ; that  when  the  State  realized  the  disadvan- 
tage of  it,  steps  were  taken  to  eliminate  it  entirely,  and 
that  this  was  done  by  the  purchase  of  the  competitive  lines. 
There  was  at  first  the  inevitable  consolidation  of  the  pri- 
vate lines,  eliminating  competition  between  those  lines 
themselves,  but  intensifying  it  as  between  them  and  the 
government  lines.  Then  came  the  consolidation  of  these 
lines  with  the  State-owned  lines  by  government  purchase, 
and  competition  was  at  an  end.  It  is  only  another  case 
of  the  universal  tendency  to  combine,  and  of  the  power- 
lessness of  government  to  prevent  it.  There  is  also  pos- 
sibly a suggestion  that  governments  do  well  to  facilitate 
the  elimination  of  competition  when  and  how  they  can. 


Italian  railways.  jn  1878,  a Parliamentary  commission  in  Italy  undertook 
an  investigation  of  the  railway  situation  in  that  country. 
Testimony  was  taken  throughout  the  kingdom,  and  an 
enormous  mass  of  material  collected.  In  1881,  this  Com- 
mission made  its  report  to  the  government,  which  was 
subsequently  published  in  seven  quarto  volumes.  It  was 


37 

the  most  thorough  railway  investigation  ever  undertaken 
in  the  world,  and  the  report  is  probably  the  most  valuable 
in  existence.  The  material  parts  of  it  have  been  trans- 
lated into  French,  and  are  thus  available.  From  the  work 
of  this  Commission  it  appears  that,  prior  to  the  wars  which 
resulted  in  the  union  of  the  Italian  States  in  1870,  the 
principal  railway  lines  of  Italy  not  only  were  disconnected 
and  independent  of  each  other,  but  also  constituted  iso- 
lated or  strictly  local  systems  for  each  of  the  chief  inde- 
pendent states.  Thus  the  lines  in  Tuscany,  in  Lombardy, 
and  in  Piedmont  were  wholly  distinct  both  from  one  an- 
other and  also  from  those  centering  in  Venice,  Rome  and 
Naples.  Some  of  the  early  charters  had  come  from  the 
Emperor  of  Austria  and  one  from  the  Pope:  the  lines 
were  inadequate  to  the  demands  of  the  business  of  the 
country,  the  service  was  very  poor  and  the  companies  sub- 
stantially bankrupt  and  irresponsible,  but  there  was  plenty 
of  competition. 

The  problem  after  1870  was  to  unite  and  consolidate 
these  scattered  and  local  lines  into  systems  fit  for  united 
Italy,  to  construct  new  lines,  to  reconstruct  old  ones,  to 
re-equip  and  to  reconstitute ; and  then  to  operate  the  re- 
constructed lines  as  a whole.  The  range  of  mountains 
from  north  to  south  which  constitutes  the  back-bone  of 
the  Italian  peninsula  dictated  a natural  division  of  terri- 
tory for  the  amalgamated  lines.  There  was  as  of  course 


38 

much  local  jealousy  to  overcome.  Although  Italy  was  too 
poor  to  spend  much  money  in  experiments,  there  was 
thought  to  be  danger  to  the  autonomy  of  the  new  state  in 
permitting  foreign  capital  to  come  into  the  railways,  and 
it  was  prevented  by  the  government,  so  that,  in  conse- 
quence of  all  these  matters  and  hindrances,  things  at  first 
moved  slowly.  Connecting  links  were  first  built,  which 
served  to  unite  the  isolated  local  systems,  the  plan  being 
to  consolidate  the  local  parallel  and  competing  lines  rather 
than  the  connecting  lines.  Finally  the  roads  fell  into  four 
systems — that  of  Upper  Italy,  that  of  Rome,  that  of  the 
East  coast,  and  that  of  Sicily  and  the  South.  Here,  as 
elsewhere  in  Europe,  competition  between  parallel  lines 
did  not  enter  into  the  scheme  of  construction  and  recon- 
struction, and  consequently  consolidation  was  not  only  in- 
evitable but  easy,  and  it  was  facilitated  wherever  there  was 
duplication.  Upon  the  division  of  territory  between  the 
four  systems,  and  with  the  consolidation  of  lines  within 
those  four  territories  respectively  and  the  building  of  the 
connecting  links,  the  problem  of  construction  was  in  a way 
to  be  solved ; or,  in  other  words,  the  lines  were  laid  down 
and  ready  for  operation. 

State  owner-  Next  came  the  problem  of  ultimate  ownership  and  pres- 

ship  and  private 

operation.  ent  maintenance  and  operation.  Soon  after  1870  the  State 
had  begun  to  buy  up  the  lines,  especially  in  the  North, 
where  there  was  danger  from  Austrian  influence,  and  by 


39 

about  1875  a considerable  part  of  the  mileage  of  the  king- 
dom was  owned  and  operated  by  the  State.  So  that 
by  that  time  Italy  seemed  committed  to  what  may  be 
called  the  Belgian  system  of  State  ownership  and  opera- 
tion. But  Belgium  was  rich  and  Italy  was  poor,  and  it 
was  soon  found  that  the  State  was  neither  managing  the 
lines  well  nor  making  any  money  out  of  it;  there  was, 
therefore,  general  dissatisfaction  throughout  the  country 
with  the  railway  system;  neither  the  poorly  served  public 
nor  the  depleted  treasury  of  King  Victor  Emmanuel  was 
satisfied. 

It  was  in  that  state  of  affairs  that  the  investigation  of  Result  of  the 

Italian  investi- 

1878  was  undertaken,  the  result  of  which  was  that  the  gation. 

Italian  statesmen  who  had  the  matter  in  hand  came  to  the 
conclusion  that  it  was  not  the  proper  function  of  the  Ital- 
ian State  to  run  its  railways;  that  State  management  in 
Italy  had  proved  more  costly  and  less  satisfactory  than  pri- 
vate management,  and  that  the  carrying  on  of  so  vast  an 
undertaking  by  the  new  State  involved  political  risks  and 
dangers  of  a serious  nature.  The  outcome  was  the  char- 
tering in  1885  of  three  private  companies,  one,  the  Adri- 
atic, for  the  territory  on  the  east  of  the  Apennines,  a sec- 
ond, the  Mediterranean,  for  the  territory  on  the  west,  and 
a third,  the  Sicilian,  for  Sicily,  the  two  systems  in  the 
peninsula  being  of  about  equal  consequence,  while  the  one 
in  Sicily  was,  of  course,  smaller.  A fourth  company  has 


40 

since  been  chartered  to  operate  the  lines  in  Sardinia. 
These  companies  were  to  take  over  the  rolling  stock  of 
the  lines  within  their  respective  territories  at  a valuation, 
and  thus  become  the  owners  of  it,  and  to  maintain  and 
operate  the  lines,  dividing  the  gross  receipts  with  the  State 
on  an  agreed  basis.  So  that  the  ultimate  solution  was  that 
the  State  was  to  own  the  lines,  while  private  companies 
were  to  operate  them.  Practically  the  railway  business  of 
Italy  proper  is  in  the  hands  of  two  companies,  one  on 
either  side  of  the  Apennines,  the  lines  meeting  at  Naples, 
Rome,  Florence,  Milan,  and  elsewhere.  Between  1881 
and  1897  the  length  of  the  Italian  railway  system  almost 
doubled  itself,  and  in  1898,  there  were  9,813  miles  of  line 
open  for  traffic.  The  service  is  satisfactory  and  the  rail- 
way system  is  making  rapid  progress  throughout  the 
kingdom.  (Cucheval-Clarigny’s  Les  Chemins  de  fer  italiens, 
in  Revue  des  Deux  Mondes,  July  1 and  15,  1884.) 

Summary  of  the  Thus  we  see  that  in  Italy,  as  elsewhere,  competition  pre- 

Italian  position. 

ceded  combination ; that  it  was  found  to  work  mischief  and 
that  attempts  at  combination  were  the  inevitable  result; 
that  when  the  matter  was  taken  seriously  and  intelligently 
in  hand  by  the  State,  competition  was  eliminated  by  law, 
and  the  territory  divided;  and  that  then,  and  then  only, 
were  satisfactory  results  secured  in  railway  operation.  It 
appears,  therefore,  that  whether  we  choose  State  opera- 
tion as  in  Belgium  or  reject  it  as  in  Italy,  it  is  the  same 


4i 

as  far  as  competition  and  combination  are  concerned ; that 
the  same  economic  laws  govern  in  each  case,  and  that  in 
the  long  run  competition  is  eliminated. 

Railways  in  Germany  grew  up  very  much  as  they  did  in 
England,  at  first  without  any  general  plan,  and  without 
any  real  comprehension  or  appreciation  of  the  problems 
involved.  The  Germans,  however,  like  the  English,  seem 
to  have  started  right  on  the  question  of  competition. 
Their  earliest  statutes  explicitly  recognized  the  right  to  a 
monopoly  in  their  first  lines.  The  country  then  consisted, 
aside  from  the  central  Kingdom  of  Prussia,  in  large  part 
of  a number  of  semi-feudal  principalities,  and  local  railway 
systems  sprang  up  in  each  of  the  States,  which  now  consti- 
tute the  present  German  Empire,  so-called.  Prussia  fol- 
lowed Belgium  in  a general  way  in  her  early  legislation 
and  initial  construction. 

The  first  state  railway  in  Germany  was  built  in  Prussia 
about  1848-50,  from  Berlin  toward  the  Russian  frontier. 
Other  state  lines  followed,  but,  pari  passu,  many  private 
lines  were  laid  down,  some  of  them  securing  some  state 
aid,  by  way  of  guarantees  or  subsidies  or  stock  subscrip- 
tions from  the  principal  States.  Some,  however,  even  of 
the  smallest  principalities,  at  first  owned  their  lines  out- 
right and  operated  them  too.  So  there  was  at  the  start 
every  sort  of  a railway  in  Germany.  This  haphazard  and 


Railways  in 
Germany. 


42 

piecemeal  work  begot  the  inevitable  result — fierce  compe- 
tition everywhere  among  the  private  companies  and  be- 
tween them  and  the  State  roads.  The  results  were  ex- 
tremely dissatisfactory ; the  service  was  poor  and  the  rates 
high. 

About  1861,  Bismarck  came  into  power,  and  from  that 
time  dates  the  influence  of  militarism  upon  the  railway  sys- 
tem of  Germany.  It  has  since  shaped  and  coloured  the 
whole  development  and  operation  of  the  German  lines. 
He  saw  clearly  enough  that  the  mixed  and  competitive 
system  was  a bad  one,  not  only  from  a military  point  of 
view,  but  also  from  the  point  of  view  of  the  country  at 
large.  Steps  were,  therefore,  gradually  taken,  in  Prussia 
especially,  to  acquire  the  private  lines  and  to  consolidate 
competing  and  conflicting  interests.  The  matter  moved 
slowly  because  the  country  was  poor,  but  the  mileage 
nearly  doubled  between  1865  and  1875. 

After  the  war  with  France  in  1871,  more  rapid  progress 
was  made  in  unifying  the  railway  system  of  the  country. 
By  1878,  there  were  about  3,000  miles  of  State-owned  and 
operated  lines;  2,000  miles  of  privately-owned  and  State- 
operated  lines,  and  about  6,000  miles  of  privately-owned 
and  privately-operated  lines.  In  1881,  the  government 
owned  more  than  7,000  miles  of  line,  only  about  3,000 
miles  remaining  in  the  hands  of  private  companies.  In 
1885,  the  government  owned  13,000  miles  of  line  in  Prus- 


43 

sia  alone,  while  only  1,000  miles  remained  in  private 
hands.  In  1900,  there  were  30,597  miles  of  railway  in  the 
German  Empire,  more  than  93  per  cent  of  which  were 
owned  and  operated  by  the  State.  Under  the  present  law 
the  government  is  required  to  manage  the  railways  “in 
the  interest  of  general  traffic  as  a single  system”  (Consti- 
tution of  the  German  Empire,  art.  42),  and  in  1886  the 
government  issued  a Code  of  Railway  Regulation,  appli- 
cable to  the  whole  railway  system  of  the  country.  (Re- 
port on  Prussian  Railways  in  the  English  Consular  and 
Diplomatic  Reports  (London,  1902).) 

Competition  practically  ceased  in  Germany  by  about 
1875,  and  for  the  past  quarter  of  a century  the  railways 
of  the  country  have  been  operated  on  non-competitive 
lines.  Pooling  arrangements  with  the  canals  and  other 
competing  waterways  are  sanctioned,  in  order  fully  to 
eliminate  wasteful  competition  and  unjust  discrimination. 
So  far,  therefore,  as  the  experience  of  the  German  lines  is 
of  value  to  us,  it  confirms  the  views  here  contended  for; 
and  the  history  of  those  lines  bears  out  entirely  the  state- 
ment upon  which  my  argument  is  based,  that  wherever 
combination  is  possible  competition  is  impossible,  so  that, 
a.-  railways  develop,  territory  is  inevitably  divided  between 
the  lines  and  competition  thus  effectually  eliminated. 
(Mange’s  U exploitation  des  Chemins  de  fer  de  la  Prusse 
depuis  lear  r achat  par  Vet  at,  in  Revue  des  Deux  Monde  s , 
May  1,  1893.) 


44 


Railways  in 
Austria-Hungary. 


In  1901,  Austria-Hungary  had  39,014  kilometers  of  line 
open  for  traffic.  The  first  Austrian  charter  was  granted 
in  1836,  and  construction  went  on  actively  thereafter  until 
the  revolution  of  1848.  The  original  idea  was  to  follow 
the  French  system,  and  have  the  lines  built  and  operated 
by  private  companies.  Their  statute  of  1838,  it  may  be 
noted,  was  the  first  general  railroad  law  enacted  in  any 
country  in  the  world.  It  provided  for  undertakings  by  pri- 
vate companies,  and  for  guarantees  by  the  State  of  in- 
terest upon  the  cost  of  construction;  it  limited  dividends 
on  shares  to  fifteen  per  cent,  and  absolutely  prohibited  the 
construction  of  parallel  lines.  It  was  discovered,  however, 
as  time  ran  on,  that  the  French  system  was  not  well  suited 
to  the  condition  of  things  in  Austria;  and  in  spite  of  statu- 
tory prohibition,  as  the  lines  were  constructed  and  put 
into  operation,  competition  ran  riot.  There  was  also  the 
usual  iniquity  growing  out  of  constructing  lines  for  a 
chance  to  speculate  in  the  securities ; and  the  competition 
of  the  waterways — of  the  Danube  and  the  canals — al- 
though pooling  between  them  and  the  railways  was  al- 
lowed and  encouraged,  added  to  the  confusion  and  disor- 
der of  private  management.  So  in  1873,  Austria  fell  into 
line  with  the  other  countries  of  Europe,  and  started  off  in 
the  direction  of  State  ownership  and  control.  In  1885, 
about  three-quarters  of  the  mileage  in  Austria  was,  how- 
ever, still  in  the  hands  of  private  companies,  but  all  the 


45 

lines  in  Hungary  were  at  that  time  owned  and  operated 
by  the  State.  By  1898,  more  than  half  of  the  Austrian 
lines  were  under  State  management,  and  the  tendency  sets 
more  and  more  in  that  direction. 


In  May,  1900,  Russia  (including  Russia-in-Asia)  hadRussian  railways. 
41,400  miles  of  completed  railway,  and  8,000  miles  under 
construction,  including  the  great  Trans-Siberian  line, 
which  is  the  greatest  railway  enterprise  yet  undertaken 
anywhere.  Work  began  on  this  line  in  March,  1891,  and 
it  is  just  now  opening  for  traffic.  The  estimated  cost  is 
about  five  hundred  millions  of  dollars.  (Gen-are’ s Greater 
Russia.)  The  distance  all  rail  from  Paris  to  Port  Arthur 
01  Vladivostok  is  about  7,000  miles,  and  it  is  proposed 
shortly  to  arrange  a through-car  service  from  la  Gare  de 
I'Est  to  Port  Arthur  and  Peking.  The  government  has 
furnished  a large  part  of  the  capital  required  for  construc- 
tion, and  owns  and  operates  about  two-thirds  of  the  total 
mileage  in  European  Russia;  it  has  in  addition  subsidized 
and  thus  controls  and  dominates  the  policy  of  the  lines 
owned  and  operated  by  private  companies.  The  tendency, 
as  elsewhere  in  Europe,  is  toward  complete  government 
ownership  and  operation.  There  is,  therefore,  in  Russia, 
it  will  probably  go  without  saying,  no  such  thing  as  hurt- 
ful competition,  and,  consequently,  none  of  the  evils  inci- 
den  thereto.  (Guide  to  the  Great  Siberian  Railway,  pub- 


46 

lished  by  the  Russian  Ministry  of  Ways  and  Means  of  Com- 
munication (St.  Peterburg,  1900);  Shoemaker’s  Great 
Siberian  Railway  (New  York,  1903).) 

Railways  in  jn  the  smaller  European  countries  we  find  the  same  va- 
the  minor  coun- 
tries of  Europe,  riety  in  railway  operation  and  control  as  in  other  things; 

but  the  tendency  everywhere  is  to  government  ownership 

or  to  such  a strict  government  regulation  as  effectually 

eliminates  anything  like  competition  between  the  lines. 

Thus  in  Norway,  in  1902,  there  were  reported  1,203 
miles  of  line,  all  now  owned  and  operated  by  the  govern- 
ment; whereas  in  Sweden,  at  the  end  of  1901,  there  were 
7,217  miles  of  line  in  operation,  of  which  only  2,392  were 
government  lines.  But  although  in  1893  there  were  re- 
ported to  be  not  less  than  108  different  owners  of  private 
lines  in  Sweden,  the  law  strictly  and  successfully  prohibits 
competition  between  them,  or  between  them  and  the  State 
lines. 

The  last  available  figures  for  the  Spanish  lines  show 
8,607  miles  open  for  traffic  in  that  country,  all,  as  in  Portu- 
gal, owned  by  private  companies,  but  supported  and  con- 
trolled by  the  State. 

In  Switzerland,  where  in  1899  there  were  2,396  miles  of 
line  in  working  order,  the  governmental  supervision  has 
until  recently  been  much  the  same  as  in  Spain.  In  1898, 
by  popular  vote,  it  was  determined  (in  view  of  the  evite 


47 

<jt  over-construction  and  some  hurtful  competition  in  spite 
of  legislative  prohibition)  to  purchase  for  the  government 
the  five  chief  lines,  thus  putting  Switzerland  in  the  Bel- 
gian class  of  countries  owning  and  operating  their  railway 
lines.  This  scheme  is  now  being  financed  and  carried  out 
by  the  Swiss  government.  (Haguet’s  Le  rachat  des 
Chemins  de  fer  suisses  et  des  consequences  (Paris,  1902).) 

The  railway  history  of  these  relatively  unimportant  Eu- 
ropean countries  is  of  much  less  interest  and  value  to  us 
than  that  of  the  greater  States,  but  it  discloses  nothing 
which  makes  against  the  position  here  maintained.  The 
Italian  system  has  been  followed  substantially  in  Holland, 
and  in  Denmark  and  by  some  of  the  other  minor  Scandi- 
navian countries. 

The  construction  of  railways  in  India,  which  commenced 
in  1853,  has  been  conducted  on  three  different  systems: 
first,  the  employment  of  companies  under  a system  of 
guarantee;  secondly,  by  the  State  through  its  own  offi- 
cials; and  thirdly,  by  assisted  companies  either  with  or 
without  guarantee  or  subsidy  from  the  State,  and  working 
with  capital  wholly  raised  by  themselves  or  partly  with 
capital  provided  by  the  State.  Out  of  eight  lines  con- 
structed on  the  first  system,  five  have  been  purchased  by 
the  State.  Two  of  these  are  worked  by  companies.  The 
more  important,  the  East  Indian  line,  is  carried  on  by  the 


Railways  in 
India. 


48 

same  company  that  constructed  it  in  the  first  instance,  on 
special  terms  as  to  the  sharing  of  profits.  The  second, 
the  South  India  line,  is  in  the  hands  of  a new  company, 
whose  capital  was  subscribed  by  the  shareholders  of  the 
old  one.  The  three  remaining  lines  are  worked  by  the 
State,  and  all  five  come  into  the  category  of  State  lines 
in  the  accounts  of  the  Government  of  India.  (Macgreg- 
or’s  Ways  and  Works  in  India  (London,  1894).) 

The  total  number  of  miles  of  Indian  railway  open  for 
traffic  on  the  31st  of  March,  1902,  was  25,529.  Although 
construction  began  about  the  middle  of  the  last  century, 
the  system  has  been  developed  almost  entirely  since  what 
English  writers  on  railway  problems  speak  of  as  “the  rise 
and  fall  in  England  of  the  great  fever  known  as  the  railway 
mania; ” to  which  detailed  reference  has  hereinbefore  been 
made.  The  Indian  railways  were,  therefore,  planned  and 
constructed  in  the  light  of  the  experience  afforded  by  the 
home  construction  and  development,  and  many  of  the 
cruder  home  blunders  were  thus  avoided.  They  now  fall 
into  one  or  other  of  four  classes;  (a)  State-owned  lines, 
worked  by  companies,  (b)  State-owned  and  State-operated 
lines,  (c)  lines  constructed  by  guaranteed  companies,  and 
(d)  lines  constructed  by  assisted  companies.  The  English 
government,  following  the  French  lead  in  that  respect, 
provided  for  a system  of  guarantees,  by  which  the  neces- 
sary funds  were  cheaply  found;  in  laying  down  the  lines 


49 

paralleling  was  avoided,  and  competition  effectively  pre- 
vented. Where  there  is  no  competition  there  is  the  less 
incentive  for  combination,  and  there  seems  not  to  have 
been  any  great  tendency  in  the  Indian  lines  to  combine. 
India,  therefore,  stands  negatively  for  the  soundness  of 
my  position.  (Bell’s  Railway  Policy  in  India  (London, 
1894).) 

These  railways  seem  to  be  rather  poor  affairs;  there  is 
much  complaint  of  indifferent  service  and  high  rates. 
How  far  these  things  may  be  chargeable  to  the  inefficiency 
of  the  government  or  may  be  due  to  the  system  itself  does 
not  appear.  They  have  up  to  the  end  of  1899  involved  a 
yearly  loss  to  the  Indian  revenues,  but  the  working  of  the 
year  1900  resulted  for  the  first  time  in  the  history  of  the 
Indian  Railway  system  in  a net  gain  to  the  State  of  Rs. 
87,239,  and  in  1901  Rs.  1,154,119.  From  the  commence- 
ment of  railways  in  India,  about  half  a century  ago,  to  the 
end  of  the  year  1899,  the  loss  to  the  Indian  revenues 
amounted  to  Rs.  57,811,487. 

Whatever  else  may  be  true  of  the  Indian  lines,  they  have 
been  constructed  and  are  operated  entirely  on  the  principle 
of  non-competition  and  division  of  territory,  and  there 
being  no  competition  there  has  been  little  tendency  to 
combine ; in  other  words,  the  evil  of  competition  not  exist- 
ing or  not  being  allowed  to  exist,  there  is  no  call  for  com- 
bination. This  is,  as  I have  said,  negative  evidence  in 


50 

support  of  the  contention  that  wherever  competition  is 
possible  combination  is  inevitable. 


Railways  in  The  present  railway  situation  in  Mexico  is  fully  disclosed 
Mexico 

in  an  exceedingly  valuable  report  recently  made  to  the 
government  by  Senor  Limantour,  Secretary  of  Finance. 
It  purports  to  have  been  based  upon  a careful  investigation 
of  the  facts,  and  is  on  the  face  of  it  as  intelligent  and  com- 
prehensive a State  paper  as  any  that  has  emanated  in  re- 
cent years  from  any  government  office  anywhere  in  the 
world  upon  the  subject.  The  fact  that  Senor  Limantour, 
who  is  now  virtually  Prime  Minister  of  Mexico,  has  been 
nominated  by  President  Diaz  as  his  successor  in  the  presi- 
dential office  suggests  his  high  standing  at  home  and 
gives  weight  abroad  to  his  views  on  these  questions.  This 
report,  which  seems  largely  to  speak  the  voice  of  the  Secre- 
tary himself,  deals  at  length  with  the  problems  of  competi- 
tion and  combination,  and  discloses  the  fact  that  the  policy 
of  the  Diaz  administration,  as  now  settled  and  determined, 
is  to  meet  and  solve  these  problems  by  absolute  govern- 
ment ownership,  rather  than  by  any  further  futile  attempts 
at  legislative  control.  The  government,  finding  that  the 
general  railway  law  of  1898  (from  which,  when  it  was 
passed — as  in  the  case  of  our  original  Interstate  Commerce 
law — great  things  seem  to  have  been  expected)  was  prov- 
ing inadequate  to  the  due  regulation  and  administration 


5i 

of  the  lines,  and  realizing  the  necessity  of  stronger  and 
surer  governmental  control,  has  lately  come  to  the  policy 
of  going  into  the  open  market  and  of  adopting  the  same 
tactics  as  private  individuals  or  companies  in  purchasing 
the  shares  of  such  lines  as  it  desires  to  control.  Mexico 
is,  therefore,  now  fully  committed  to  the  theory  of  govern- 
mental ownership,  if  not  to  that  of  governmental  opera- 
tion. The  government  is  just  now  offering  to  purchase 
the  Vera  Cruz  & Pacific  line,  which  has  just  been  com- 
pleted by  American  capital  and  lost  to  its  original  owners 
by  the  recent  suspension  of  the  Maryland  Trust  Company 
of  Baltimore. 

Those  portions  of  Senor  Limantour’s  report  which 
disclose  the  processes  by  which  the  government  has  ac- 
quired and  is  acquiring  such  a proportion  of  the  shares 
of  the  leading  lines  as  will  give  it  due  preponderance  in 
their  control  are  very  interesting.  The  explanations  of 
the  causes  which  have  moved  the  government  to  this  step, 
as  contained  in  the  report,  are  of  an  even  wider  interest 
and  significance  to  students  of  the  railway  problem.  In 
brief,  Senor  Limantour’s  explanation  is  this:  The  gov- 
ernment has  until  recently  been  in  the  usual  elementary 
attitude  of  encouraging  by  concessions,  subsidies  and 
otherwise  all  the  railways  which  either  citizens  or  foreign- 
ers would  undertake  to  build  and  operate  as  private  enter- 
prises, in  the  supposed  interest  of  the  most  rapid  possible 


LIBRARY  ' 

UNIVERSITY  OF  ILLINOIS 


52 

development  of  the  country.  It  was  only  in  1898  that  a 
general  railway  law  was  passed,  which,  however,  soon 
proved  entirely  inadequate.  It  was,  therefore,  in  addition 
found  necessary  to  prescribe  new  rules  relative  to  granting 
concessions  for  competing  lines  between  points  already 
connected,  and  to  establish  a Tariff  Commission — some- 
thing like  our  Interstate  Commerce  Commission — which 
was  an  attempt,  through  the  agency  of  a governmental 
bureau,  to  prevent  combinations  in  freight  rates,  and  to 
regulate  them  in  the  public  interest. 

Influence  of  the  in  the  light  of  the  experience  of  other  countries — and, 
United  States. 

as  it  appears,  especially  in  the  light  of  the  experience  in 
the  United  States — competition  between  the  lines  is  by  this 
report  pronounced  harmful,  “except  where  traffic  is  large 
enough  to  support  it” — whatever  that  means.  Govern- 
ment ownership  and  regulation  is  declared  to  be  the  only 
real  preventive  or  remedy  against  such  disastrous  com- 
petition— with  its  inevitable  result  of  the  consolidation  of 
competing  interests.  It  is  further  suggested  that  the  fact 
that  groups  of  foreign  capitalists  had  undertaken  to  con- 
solidate several  of  the  principal  lines,  obliged  the  govern- 
ment to  take  a definite  attitude  lest  their  great  railway 
properties  should  thus  be  taken  over  and  controlled  by 
alien  capital.  It  was  clearly  seen  that  these  contests  for 
territory  between  the  hitherto  conflicting  interests  would 
eventually  and  inevitably  result  in  either  the  forced  or  the 


53 

voluntary  consolidation  of  the  competing  systems.  The 
law  as  it  stood  was  inadequate  to  prevent  the  acquisition 
in  the  open  market  by  any  private  interest  of  a control  of 
the  shares  of  any  company  sought  to  be  acquired,  and 
there  was  no  way  to  prevent  the  consolidation  of  inter- 
ests through  voting  trusts  or  otherwise. 

Specifically,  the  situation  in  the  early  part  of  1902,  which 
seemed  to  drive  the  government  strongly  in  the  direction 
of  State  ownership  and  control,  was  this:  The  railways 
of  the  country  were  found  already  to  be  in  the  hands  of  no 
more  than  four  groups  of  capitalists,  viz. : the  Central,  the 
National  (having  lately  absorbed  the  International),  the 
Interoceanic  and  the  Mexican — all  but  the  last  showing 
great  expansive  activity.  The  Central  especially,  by  the 
recent  purchase  of  exclusive  port  concessions  and  the 
building  of  new  lines  in  and  out  of  the  City  of  Mexico,  was 
threatening  to  cripple  the  National  line.  Plainly,  there- 
fore, consolidation  between  it  and  the  Central  would 
inevitably  follow  in  the  ordinary  course. 

Meanwhile,  through  Messrs.  Speyer  & Co.,  the  National 
was  trying  to  acquire  the  control  of  the  Interoceanic  route, 
but  this  was  frustrated  by  the  government.  Various  cir- 
cumstances favored  the  government  as  against  the  foreign 
bankers  in  its  secret  move  to  secure  control  of  the  Inter- 
oceanic’s  debentures.  “The  ability  and  high  financial 
standing,”  says  the  report,  “of  the  firm  representing  the 


State  acquisi- 
tion and  control 
proposed. 


54 

interests  of  the  Mexican  National  constituted  a serious 
obstacle  to  the  attainment  of  our  aims,  and  it  was  neces- 
sary to  act  as  we  did  with  decision,  rapidity  and  absolute 
secrecy.”  A proposition  for  a common  exploitation  by  the 
government  in  association  with  the  National,  the  Inter- 
national and  the  Interoceanic  companies  followed;  “but 
it  was  soon  recognized  that  such  an  arrangement  could 
not  have  the  necessary  durability  nor  afford  the  indispen- 
sable conditions  whereby  the  companies  might  secure 
themselves  definitely  against  the  hostility  of  other  corpo- 
rations to  which  they  might  be  exposed  in  time.”  The 
government  thereupon,  wisely  declining  to  be  drawn  into 
any  partnership  arrangement  with  the  companies,  reverted 
to  its  original  plan,  namely,  an  arrangement  such  as  would 
give  the  State  primary  and  absolute  control  of  the  three 
systems,  and  in  such  a way  as  to  protect  each  of  them 
against  such  future  competition  as  would  be  sure  to  arise 
under  the  existing  state  of  things. 

The  report  declares  that  the  government  has  now  deter- 
mined to  grant  no  concessions  hereafter  for  competing 
parallel  lines,  except  in  territories  where  dividends  can 
be  earned  by  each  such  line.  Several  voting  trusts,  in 
some  of  which  the  government  has  had  an  interest,  have 
existed  in  Mexico,  but  some  of  these  have  lately  been  dis- 
solved upon  the  advice  of  American  counsel. 


55 

It  was  at  first  proposed  that  the  government  should 
exercise  control  of  the  new  consolidated  system  through 
the  voting  trust  of  the  National,  already  in  existence. 
But,  “according  to  the  valued  opinion  of  American  attor- 
neys, who  are  specialists  in  affairs  of  this  nature,  it  would 
have  been  attended  with  many  objections  of  a legal  charac- 
ter, and  have  proved  a fruitful  source  of  litigation.”  Ac- 
cordingly, the  consent  of  its  three  members  was  obtained, 
and  the  voting  trust  dissolved,  an  agreement  being  entered 
into  with  Messrs.  Speyer  & Co.  whereby  they  were  to  se- 
cure for  the  government  40  per  cent  or  more  of  the  voting 
shares.  The  report  then  enters  into  a detailed  account 
of  the  steps  by  which  this  was  successfully  accomplished, 
4714  per  cent  of  the  shares  being  thus  secured.  It  also  goes 
fully  into  the  question  of  the  probable  earnings  of  the  con- 
solidated railways  and  of  the  issuance  of  treasury  notes 
for  $12,500,000,  American  gold,  to  pay  for  them. 

The  advantages  to  the  government,  growing  out  of  the 
control  of  the  new  consolidated  system,  is  summarized  in 
the  report  as  follows: 

“1.  The  having  obtained  by  one  stroke  the  control  of  the 
lines  belonging  to  the  National  and  International  with- 
out losing  control  of  the  Interoceanic. 

2.  Having  secured  a considerable  reduction  in  the  total 
cost  of  the  operation ; and 


56 

3-  The  ability  to  effect  payments  in  such  manner  as  in 
no  wise  to  disturb  the  equilibrium  of  the  budget,  and  out 
of  funds  which  in  the  long  run  will  be  recovered  by  the 
State.” 

Experience  in  Repeated  reference  is  made  throughout  the  report 
the  United  States 

controlling.  to  the  railway  situation  in  the  United  States,  and  it  is 
obvious  that  our  experience  has  strongly  influenced  the 
Mexican  government  in  its  new  departure  in  the  direction 
of  State  ownership.  They  have  learned  our  lesson  before 
we  have  learned  it  ourselves;  and,  now  that  Mexico  has 
come  into  line  with  the  rest  of  the  world  in  its  attitude 
upon  the  question  of  railway  competition  and  combination, 
the  United  States  stands  alone  among  the  greater  com- 
mercial countries  of  the  earth  in  continued  persistence  in 
the  futile  attempt  to  secure  competition  between  railway- 
lines  and  to  prevent  combination  and  the  consequent 
division  of  territory;  and  it  leaves  us  upon  the  general 
questions  involved  and  upon  the  larger  issues  of  the  rail- 
way problem,  solitary  and  alone,  the  most  backward  nation 
in  Christendom  or  out  of  it, — distanced  in  the  matter  not 
only  by  all  the  greater  countries  of  Europe,  but  even  by 
Egypt,  Japan  and  Chili,  and,  for  the  matter  of  that,  by 
Zulu  Land  and  Zanzibar. 

From  a return  prepared  by  the  French  Ministry  of  Pub- 
lic Works  and  published  in  Le  Journal  Officiel  of  May  25, 
1902  (from  which  many  of  the  figures  throughout  this 


57 

brief  have  been  taken),  it  appears  that  there  were  in  Mex- 
ico in  1870  no  more  than  349  kilometers  of  line;  that  in 
1880  there  were  only  1,120  kilometers,  while  in  1890  there 
were  9,713  kilometers,  and  in  1900  a total  of  15,454  kilo- 
meters of  railway  in  operation — now,  as  we  have  seen,  all 
substantially  under  government  control  or  presently  to 
pass  thereunder,  as  the  result  of  the  investigation  and  com- 
parison of  the  advantages  of  private  versus  government 
ownership  and  operation  set  forth  in  Senor  Limantour’s 
report. 

In  Australia,  State  ownership  and  control  has  since  The  Australian 

lines. 

about  i860  been  absolute  and  universal.  The  latest  avail- 
able statistics  show  12,926.75  miles  of  line  open,  viz.:  In 
New  South  Wales  (June  30,  1902),  3,025.75  miles;  in  Vic- 
toria (June  30,  1901),  3,221  miles;  in  South  Australia  (June 
30,  1901),  1,736  miles;  in  Queensland  (June  30,  1900),  2,801 
miles;  and  in  West  Australia,  2,143  miles,  by  the  last  re- 
port. While  there  was  at  first  some  construction  by  pri- 
vate companies,  every  mile  is  now  State  railway.  The 
English  learned  their  lesson  at  home,  and  when  it  came 
to  the  building  and  financing  of  colonial  railways,  they 
profited,  after  a little  initial  blundering,  by  their  home  ex- 
perience. So  that  all  the  later  Australian  lines  have  been 
well  and  cheaply  built,  and  have  become,  especially  since 
the  legislation  of  1884,  strictly  non-competitive  by  law. 


New  Zealand 
lines. 


South  Ameri- 
can lines. 


French  and 
British  African 
lines. 


58 

In  New  Zealand,  in  March,  1902,  there  were  reported 

2,235  miles  of  State  railway,  and  88  miles  of  private  lines. 

The  figures  intimate  that  there  is  no  serious  competition 
there. 

In  South  America  the  governments  generally  own  the 
lines.  In  Brazil,  in  1897,  there  were  9,072  miles  of  line  open 
and  3,500  miles  in  course  of  construction.  Of  this  mileage 
the  State  actually  owns  but  a small  part,  but  it  subsidizes 
the  rest,  and  thus  exercises  an  efficient  control  over  all, 
which  effectually  prevents  duplication  and  competition.  In 
the  Argentine  there  were  reported  in  1901  about  10,259 
miles  of  road,  mostly  government  lines.  Chili  in  1902  re- 
ported about  3,000  miles  open,  of  which  1,458  belong  to 
the  State.  (Castro’s  South  American  Railways  (Monte 
Video,  1893).) 

The  French  possessions  and  dependencies  in  North 
Africa  reported,  in  1900,  a railway  system  amounting  to 
4,628  kilometers  in  length,  as  against  3,595  in  1890,  and 
517  in  1870;  British  South  Africa  seems  to  have  had,  in 
1900,  nearly  6,000  kilometers  of  lines  in  operation.  There 
were  about  2,000  kilometers  of  line  open  in  the  Transvaal 
at  the  commencement  of  the  Boer  war,  and  about  400  kilo- 
meters in  the  Congo  in  1900.  The  total  length  of  all 
operated  lines  in  Africa,  including  the  foregoing,  the 
Egyptian  lines  and  some  little  development  in  Portuguese 


59 

East  Africa,  amounted  in  1900  to  18,467  kilos,  substan- 
tially all  of  which  is  government  line.  Competition  and 
combination  are,  therefore,  not  open  questions  in  Africa. 

The  several  European  countries  that  have  built  the  lines 
there  either  operate  them  directly  or  see  to  their  operation 
on  a strictly  non-competitive  basis. 

No  useful  deductions  can  be  drawn  from  the  lines  in  Chinese  rail- 
ways. 

China.  About  1,000  miles  were  open  in  1902,  aside  from 
the  Trans-Siberian  line.  These  lines  have  been  construct- 
ed by  British,  French,  Franco-Belgian  and  German  com- 
panies, and  are  so  far  isolated  and  insignificant  that  the 
question  of  competition  cannot  yet  have  been  a serious 
one.  The  concessions  have,  however,  not  contemplated 
competition  or  duplication.  An  ambitious  scheme  of  con- 
struction has  been  outlined,  which  will  be  many  years  in 
working  out. 

Japan  in  1900  reported  2,806  miles  of  private  line,  and  Japanese  rail- 
ways. 

833  miles  owned  and  operated  by  the  State.  The  gov- 
ernment lines  are  worked  at  a profit.  The  roads  are  of 
three  classes,  “State,”  “Prefecture”  and  “Village”  lines, 
all  maintained  wholly  or  in  part  at  the  expense  of  the 
government,  and  subject  to  complete  governmental  con- 
trol. It  is  proposed  in  future  that  all  the  new  lines  shall 
be  built  and  owned  by  the  government. 


6o 


Egyptian  lines. 


Historical 

summary. 


In  Egypt  there  were  reported  as  of  January  i,  1901, 
about  2,063  miles  of  completed  line,  1,403  miles  of  which 
are  in  the  Delta  of  the  Nile,  and  660  in  upper  Egypt.  Of 
the  total  mileage  all  the  standard  gauge  line,  amounting 
to  1,393  miles,  is  owned  and  operated  by  the  State.  About 
670  miles  of  light  agricultural  line  are  owned  by  private 
companies,  but  are  operated  without  competition  with  the 
government  lines. 

From  the  foregoing  general  view  of  railway  history  and 
development  throughout  the  world,  it  appears — and  it  is, 
moreover,  a matter  of  common  knowledge — that 'there  is, 
as  matter  of  fact,  a universal  and  irresistible  tendency  in 
competitive  railways  in  the  same  territory  to  combine  and 
to  divide  the  territory  between  them  ;j  that  attempts  by  leg- 
islation or  litigation  to  prevent  it  have  uniformly  failed; 
that  States  which  at  first  recognized  and  sought  to  en- 
force the  principle  of  competition  between  railways  have 
one  after  another  ultimately  abandoned  the  attempt ; that 
nowhere  on  the  earth,  except  in  the  United  States,  is  the 
principle  of  competition  now  recognized  or  still  sought  to 
be  enforced ; that  railways  in  new  countries  or  colonies  of 
old  countries,  constructed  during  the  last  quarter  of  a cen- 
tury in  the  light  of  the  experience  of  the  older  countries 
as  to  competition,  have  been  constructed  and  operated 


6 1 

from  the  start  on  non-competitive  lines;  that  the  amalga- 
mation of  parallel  and  competing  lines  is  entirely  consist- 
ent with  good  service,  reasonable  rates  and  adequate  gov- 
ernmental supervision  and  control;  that  where  railways 
compete  there  is  always  an  enormous  waste  of  capital  and 
effort  and  frequently  poor  service  and  high  rates ; that  the 
tendency  everywhere  is  to  eliminate  competition  where 
any  measure  of  it  still  exists ; that  government  ownership 
is  good  or  bad  according  to  the  point  of  view;  that  there 
is  a strong  tendency  in  Europe,  and  elsewhere  except  here 
and  in  England,  toward  government  ownership  and  op- 
eration; that  the  governments  of  Europe,  with  ten  times 
the  police  power  of  our  own,  have  long  since  abandoned 
all  attempts  to  hinder  and  thwart  the  laws  of  trade  and 
commerce  by  restrictive  legislation,  or  to  prevent  the  in- 
evitable in  railway  development;  that,  instead  of  oppos- 
ing this  economic  evolution,  the  most  enlightened  Euro- 
pean governments  have  on  the  contrary  legalized  it,  and 
seek  to  enforce  and  regulate  it  in  the  public  interest  ; that 
the  best  and  cheapest  service  is  secured  where  competi- 
tion is  impossible,  and  where  the  State  puts  the  emphasis 
of  its  effort,  not  on  interference  with  railway  finance,  but 
on  securing  good  service  at  fair  rates. 


6 2 


II. 

Being  thus  universal  and  inevitable  these  amalgamations 
operating  as  divisions  of  territory  cannot  be  contrary  to 
public  policy,  and  it  is  open  to  this  Court  so  to  determine  on 
this  appeal. 

To  avoid  misapprehension  I ought  to  say  preliminarily 
that  no  argument  is  here  contemplated  which  will  put  in 
issue  the  expediency  or  wisdom  of  the  Act  of  July  2,  1890, 
known  as  the  Sherman  Act ; nor  is  the  Court  at  all  to  be 
asked  to  pass  upon  the  justice  or  policy  of  that  statute, 
nor  to  find  it  unconstitutional  upon  its  alleged  contrariety 
to  public  policy.  It  is  conceded  that  all  such  considera- 
tions in  respect  of  this  statute  address  themselves  primarily 
to  the  Congress,  that  such  questions  in  this  case  concern 
the  legislature  exclusively,  and  that  with  them  this  Court 
has,  therefore,  now  nothing  to  do. 

What  I seek  to  do  is  to  draw  the  attention  of  the  court 
to  the  history  of  railway  development  as  affecting  the  sub- 
ject matter  of  this  litigation;  and  what  I have  in  mind  is 
an  argument  on  the  equity  of  the  statute  drawn  from  an 
historical  consideration  of  the  constitutional  questions  of 
public  policy  involved,  arising  out  of  the  demonstrable  in- 
evitability of  railway  consolidations  and  mergers  through- 
out the  world — considerations  particularly  fit  to  be  urged 
upon  this  Court  in  such  a case  as  this,  and  proper  to  con- 
trol its  decision. 


^3 

It  is  quite  true  that  when  the  legislature  speaks,  public 
policy  becomes  whatever  the  statute  enacts;  but  it  Is 
equally  true  that  every  statute  may  still  be  a subject  of 
judicial  construction,  and  that  it  is  always  open  to  the 
Court,  as  between  two  or  more  possible  constructions,  to 
adopt  that  one  which  speaks  the  language  of  right  reason 
and  which  is  most  consonant  in  such  a case  as  this  with 
those  circumstances  and  conditions  which  affect  the  mat- 
ter throughout  the  world.  To  argue  that  the  construction 
placed  upon  a statute  makes  it  contrary  to  public  policy 
is  quite  another  thing  than  to  argue  the  unconstitutional- 
ity of  the  statute  on  grounds  of  public  policy.  It  is  not 
here  contended  that  the  act  is  unconstitutional. 

On  the  contrary  my  contention  is : first,  that  this  aggre- 
gation or  amalgamation  of  rail  lines  in  the  same  territory, 
being  universal  and  inevitable  in  the  normal  growth  and  de- 
velopment of  railways,  cannot  be  contrary  to  public  policy; 
and,  second,  that  upon  this  appeal  it  is  competent  for  this 
Court  by  a fair  construction  of  the  statute  so  to  adjudge 
and  determine. 

Of  a form  or  phase  of  railway  development  which  is 
world-wide  contrariety  to  public  policy  cannot  be  alleged. 
In  the  very  nature  of  things  it  cannot  be  contrary  to  an 
enlightened  public  policy;  and  any  statute  which  flies  in 
the  face  of  universality  and  inevitability,  if  open  to  con- 
struction, calls  loudly  for  construction.  Just  as,  for 


Public  policy 
as  a rule  of  con- 
struction. 


The  function 
of  the  courts ; 
People  v.  Haw- 
kins, 157  N.  Y.  1. 


64 

example,  we  cannot  legally  predicate  nuisance  of 
what  is  authorized  by  statute,  however  distasteful  the 
thing  itself  may  seem  to  be,  so  we  cannot  predicate 
contrariety  to  public  policy  of  that  which  is  universal, 
whatever  the  plausibility  of  arguments  in  the  abstract 
against  it,  or  however  much  it  may  seem  to  come 
within  the  formal  language  of  some  prohibitory  statute. 
The  inevitability  and  universality  of  a thing — of  such  a 
thing  as  this — is  its  sufficient  warrant  from  the  stand- 
point of  public  policy.  Public  policy  is  the  policy  or  gen- 
eral purpose  and  spirit  of  the  law.  We  sometimes  call  it 
the  policy  of  the  law.  So  also  public  policy  is  convention ; 
it  is,  therefore,  of  the  very  essence  of  public  policy  that 
whatever  is,  is  right. 

When  we  speak  of  public  policy  we  mean  the  law  of  the 
State,  and  that  law  is  to  be  found  in  the  Constitution,  the 
statutes  and  the  judicial  decisions.  {People  v.  Hawkins,  157 
N.  Y.  1,  12.)  It  has  these  three  sources,  and  under  our  sys- 
tem equally  these  three.  It  is  as  much  the  proper  function 
of  the  Court,  when  a case  arises,  as  of  the  legislature  or  of  a 
constitutional  convention,  to  declare  the  public  policy  of 
the  State.  A written  constitution  defines  the  public  policy 
of  a people  along  general  lines ; a statute  is  a declaration  in 
writing  of  that  public  policy  in  a particular  matter;  a 
judicial  decision  in  a given  case  operates  on  each  of  them 
by  way  of  construction,  and  thus  declares  or  defines  a rule 
of  public  policy  by  interpretation. 


65 

Considerations  of  public  policy,  when  urged  to  the  Court 
in  such  a matter  as  this,  are,  therefore,  in  a broad  sense 
constitutional  considerations.  The  federal  constitution 
itself  was  when  adopted  nothing  more  than  a reduction  to 
writing  of  some  of  the  established  principles  of  public 
policy  which  then  made  up  the  constitution  of  the  more 
civilized  European  states,  especially  of  England,  and  that 
is  all  that  it  is  now.  So,  also,  when  we  speak  of  “the  Brit- 
ish Constitution”  we  mean  nothing  but  the  body  or  the 
sum  total  of  the  unwritten  principles  of  public  policy  which 
prevail  for  the  time  being  in  that  country;  and  our  own 
federal  constitution  is  nothing  more  than  a statement  in 
writing  of  some  of  the  principles  of  public  policy  which 
prevail  here.  The  word  “Constitution,”  as  we  use  it  in  the 
United  States,  is  a collective  name  for  the  principles  of 
public  policy  on  which  our  government  is  based,  the  funda- 
mental or  organic  law  reduced  to  writing.  In  England 
a constitutional  question  is  involved  every  time  a question 
of  public  policy  is  raised.  There  it  is  a matter  of  the  dec- 
laration and  interpretation  of  an  unwritten  law;  while  in 
this  country  our  constitutional  questions  have  to  do  with 
the  interpretation  and  construction  of  a written  law  in  the 
light  of  the  public  policy  of  the  time. 

If  this  be  a sound  view,  it  follows  that  statesmanship  is 
not  confined  to  the  legislative  branch  of  a representative 


Constitutional 

considerations. 


Judicial  states- 
manship. 


People  v.  Haw- 
kins, 157  N.Y.  1. 


Nordenfelt  v. 
Maxim  - Norden- 
felt Guns,  etc., 
Co.,  (1894)  App. 
Cas.  535. 


66 

government.  It  inheres  oftentimes  to  the  long  robe  as 
well ; so  that,  as  has  just  been  said,  it  is,  on  occasion,  for 
the  bench  to  define  and  delimit  public  policy  by  the  right 
construction  of  constitutions  and  statutes — by  judicial  pro- 
nouncement— just  as  really  as  for  the  legislative  depart- 
ment of  the  government  to  prescribe  it  by  formal  enact- 
ment. It  is  the  function  of  the  court  to  construe,  and  by 
construction  to  declare.  (People  v.  Hawkins,  157  N.  Y.  1, 

13-15-) 

i 

That  has  been  very  much  the  case  in  this  court  in  every 
period  of  its  history.  Our  Constitution,  as  much  as  the 
English  or  the  French  or  any  other,  is  the  gradual  develop- 
ment of  our  political  sense  and  intelligence.  The  thing 
doesn’t  stagnate,  it  grows.  Writing  it  down  on  a sheet 
of  paper  an  hundred  and  twelve  or  fifteen  years  ago  didn’t 
paralyze  our  intelligence  or  lay  an  embargo  upon  our 
thinking.  So  that  the  question  here  and  now  is,  not  what 
was  public  policy  an  hundred  or  fifty  or  thirteen  years  ago, 
but  what  is  the  public  policy  as  of  to-day — and  for  this 
Court,  what  is  the  most  enlightened  present  public  policy 
— which  is  now  to  control  in  the  construction  of  this  stat- 
ute in  this  particular  case.  This  notion  is  well  expressed 
by  Lord  Watson  in  a comparatively  recent  case  in  the 
House  of  Lords : 


67 

“A  series  of  decisions  based  upon  grounds  of  pub- 
lic policy,  however  eminent  the  judges  by  whom 
they  were  delivered,  cannot  possess  the  same  bind- 
ing authority  as  decisions  which  deal  with  and  form- 
ulate principles  which  are  purely  legal.  The  course 
of  policy  pursued  by  any  country  in  relation  to  and 
for  promoting  the  interests  of  its  commerce  must, 
as  time  advances  and  its  commerce  thrives,  undergo 
change  and  development  from  various  causes  which 
are  altogether  independent  of  the  action  of  its  courts. 
In  England,  at  least,  it  is  beyond  the  jurisdiction 
of  her  tribunals  to  mould  and  stereotype  national 
policy.  Their  function,  when  a case  like  the  present 
is  brought  before  them,  is,  in  my  opinion,  not  nec- 
essarily to  accept  what  was  held  to  be  the  rule  of 
policy  a hundred  or  a hundred  and  fifty  years  ago, 
but  to  ascertain,  with  as  near  an  approach  to  accuracy 
as  circumstances  permit,  what  is  the  rule  of  policy  for 
the  then  present  time.  When  that  rule  has  been 
ascertained,  it  becomes  their  duty  to  refuse  to  give 
effect  to  a private  contract  which  violates  the  rule, 
and  would,  if  judicially  enforced,  prove  injurious  to 
the  community.”  (Nor  den  felt  v.  M axim-N  ordenfelt 
Guns  & Ammunition  Co.,  (1894)  App.  Cas.  535,  553, 
554-) 


68 


III. 

These  railway  combinations  have  not  in  the  past  been  and 
cannot  in  the  future  be  at  all  prevented  by  adverse  legisla- 
tion or  judicial  decision. 

The  English  Parlimentary  Committee,  to  whose  investi- 
gation and  report  reference  has  hitherto  been  made  in  the 
court  of  this  argument,  sum  up  their  view  upon  the  effect 
of  hostile  or  prohibitory  legislation  on  this  subject  as  fol- 
lows: “A  long  and  varied  experience  has  fully  demon- 
strated the  fact  that,  while  Parliament  may  hinder  and 
thwart  it,  it  cannot  prevent  it.”  The  theory  of  the  British 
Constitution  is  that  Parliament  is  omnipotent,  and  here 
there  is  formal  admission  by  Parliament  itself,  based  upon 
the  fullest  investigation,  that  there  are  things  that  omnipo- 
tence cannot  do.  That  was  a full  generation  ago,  and 
now,  for  more  than  thirty  years  past,  things  have  gone 
on  in  England  on  that  understanding.  No  serious  at- 
tempts, since  the  time  of  that  investigation  and  that  report, 
have  been  made  to  prevent  or  even  to  “hinder  and 
thwart”  railway  consolidation  in  that  country. 

Chatham  and  Within  the  last  five  years  the  notable  consolidation  of 

Southeastern 

amalgamation,  the  London,  Chatham  & Dover  and  the  London  & South- 
Eastern  lines  has  been  effected,  which  operates  to  merge 
two  theretofore  independent  parallel  and  competing  lines 


69 

and  to  allot  the  whole  southeastern  section  of  England  to 
the  amalgamated  company.  This,  as  is  usual  in  that  coun- 
try, was  accomplished  through  special  Parliamentary  pow- 
ers, which  in  this  case  were  sought  and  obtained  without 
arousing  any  great  opposition,  engendering  any  consid- 
erable heat,  or  provoking  any  declamation  about  a sacri- 
fice of  the  rights  of  the  public.  In  point  of  fact,  nothing 
but  good  seems  to  have  flowed  from  it. 

Previous  to  1899  both  these  railways  had  achieved  an 
unenviable  notoriety  for  the  inadequacy,  slowness,  and 
unpunctuality  of  their  services,  for  the  dilapidated  condi- 
tion of  their  stations  and  rolling  stock,  and  generally  for 
the  backward  state  of  their  accommodation.  In  the  case 
of  the  Chatham  Company  the  financial  position  was  also 
precarious,  and  though  the  South-Eastern  at  one  time  was 
nominally  much  stronger  in  this  respect,  it  too  had  lost 
much  ground  in  the  preceding  five  years,  and  for  1901  its 
ordinary  dividend  at  the  rate  of  only  2 per  cent  was  the 
worst  in  its  history.  Competition  of  the  worst  kind  be- 
tween the  South-Eastern  and  Chatham  Companies  was  a 
normal  state  of  affairs,  and  as  the  result  both  railways 
spent  vast  sums  of  capital  and  revenue  for  which  there  is 
at  the  present  time  little  to  show  except  duplicate  lines 
and  stations,  and  inadequate  provision  for  traffic  where 
extended  accommodation  was  most  required.  Many  times 
a fusion  of  interests  had  been  urged  upon  the  two  com- 


Parliamentary 

powers. 


70 

panies,  but  without  result.  Negotiations  for  amalgama- 
tion were  entered  upon  several  times,  but  they  always 
broke  down  at  the  crucial  moment. 

At  last,  in  1898,  an  agreement  between  the  two  com- 
panies was  come  to,  not  for  a complete  amalgamation,  but 
for  the  pooling  of  gross  revenue  and  working  expenses 
and  the  division  of  net  profits  on  a fixed  percentage  basis, 
with  additional  arrangements  for  the  joint  contribution  of 
capital  required.  It  was  not  the  intention  of  the  two 
companies  to  seek  Parliamentary  authority  for  this  ar- 
rangement, as  they  were  not  bound  to  secure  the  sanction 
of  any  other  body  than  their  shareholders.  But  the  gov- 
ernment virtually  intimated  that  the  new  arrangement  was 
so  important  and  far-reaching  in  its  bearing  on  the  inter- 
ests of  the  public,  that  the  terms  of  agreement  ought  to  be 
embodied  in  a bill.  This  bill  was  introduced  in  Parliament 
in  the  session  of  1899,  and  received  the  royal  assent  on  the 
1st  of  August  following,  and  seven  months  thereafter  the 
new  arrangement  actually  came  into  operation. 

The  preamble  to  the  “Working  Union  Act”  of  1899 
recites  that 

“With  a view  to  avoiding  undue  competition  and 
unnecessary  expense  and  delays  and  other  incon- 
veniences arising  from  diversity  of  interests  and  to 
turning  to  the  best  account  the  respective  powers 
and  resources  of  the  two  companies  * * * it  is 


7i 

expedient  and  will  be  for  the  public  advantage  that, 
subject  to  the  provisions  and  enactments  in  this 
Act  contained,  the  undertakings  of  the  two  com- 
panies should  be  used,  worked,  managed,  main- 
tained, and  improved  from  and  after  the  passing  of 
this  Act,  as  one  undertaking  * * 

The  Act  constituted  a Managing  Committee  to  admin- 
ister the  two  railways  as  one  company,  that  new  body 
being  made  up  of  the  directors  of  the  two  companies. 
(Stevens’  Investment  and  Speculation  in  British  Railways, 
158-160.) 

In  its  practical  effect  this  amalgamation  is  in  many  re- 
spects not  unlike  that  worked  out  for  the  Great  Northern 
Railway  and  the  Northern  Pacific  Railway  through  the 
Northern  Securities  Company. 

The  ease  with  which  this  latest  English  amalgamation 
has  been  accomplished  suggests  that  in  that  country  these 
questions  are  now  forever  settled  and  at  rest  along  sound 
economic  lines.  It  is  true  that  a short  time  ago,  under  the 
spur  of  local  prejudice,  and  moved  thereto  by  rather  a 
panicky  national  conceit,  the  English  government  de- 
parted for  a moment  from  its  traditional  laisser  faire  on 
this  subject,  and  made  a boyish  and  entirely  futile  effort 
to  prevent  the  recent  International  Steamship  combination 
— all  which  further  demonstrates  that  whether  government 
acts  or  whether  it  forbears  it  is  the  same.  In  either  case 


These  ques- 
tions settled  In 
England. 


72 

the  amalgamation  is  effected  and  accomplished,  and  in 
neither  case  is  the  action  of  the  government  controlling. 
With  the  government  and  without  it  alike  these  consolida- 
tions go  on.  If  they  come  to  grief,  and  when  they  come 
to  grief,  it  is  from  the  play  of  natural  causes,  and  not  be- 
cause of  legislative  or  judicial  action. 

This  “merger”  a The  substantial  unification  of  these  two  transcontinental 
fait  accompli. 

railway  lines — the  Great  Northern  and  the  Northern  Pa- 
cific— which  is  in  question  in  this  litigation,  has  been  ac- 
complished ; the  “merger”  complained  of  is  a fait  accompli; 
it  is  something  done  and  settled.  What  has  been  thus 
joined  the  law  cannot  put  asunder.  It  may  compel  a 
change  of  the  form  of  union;  it  cannot  alter  the  fact  of 
union.  The  hands  of  the  clock  do  not  go  backward,  and 
this  amalgamation,  it  may  be  respectfully  urged  even  at 
this  bar,  is  now  beyond  the  reach  of  courts  and  statutes. 
Unless  this  particular  matter  is  something  beyond  and 
outside  of  the  laws  of  railway  development  which  are  found 
to  obtain  universally,  unless  this  case  is  an  exception  to  an 
invariable  rule,  and  unless  we  can  do  what  has  not  been 
done  elsewhere  on  the  earth,  this  working  union  between 
these  two  lines  of  railway  will  ultimately  prevail  over  any 
legislation  which  attempts  its  destruction.  In  the  con- 
struction of  such  statutes  it  is  for  courts  to  do  what  they 
can,  and  not  try  to  do  what  they  can’t. 


73 

The  mandate  of  the  Court  in  this  case,  it  goes  without 
saying,  will — whatever  it  may  be — be  scrupulously  obeyed 
by  every  party  to  the  cause.  It  is  our  way  in  this  country 
to  bow  to  the  law.  But  the  thing  itself  will  go  on  and 
subsist.  A judicial  decision  may  “hinder  and  thwart  it, 
but  it  cannot  prevent  it.”  Such  a decision  may  disturb  and 
disarrange  and  postpone ; it  may  work  temporary  injury,  it 
cannot  work  ultimate  destruction.  AH  history  demon- 
strates the  absolute  truth  of  this  assertion. 

The  existence  of  every  consolidated  railway  system  in 
the  United  States  bears  further  testimony  to  the  truth  of 
this  proposition.  It  is  absolutely  and  literally  true  that 
every  one  of  these  amalgamations  has  been  created  in  the 
face  of  the  very  strongest  legislative  and  judicial  opposi- 
tion possible  to  be  brought  against  it.  The  statute  books 
of  every  state  in  the  Union  across  which  the  lines  of  one  of 
those  great  consolidated  companies  run  bristle  with  enact- 
ments against  the  combination  of  parallel  and  competing 
lines.  Absolute  prohibition  is  the  universal  law  of  statute 
and  decision  alike;  penalties  are  imposed,  fines  and  con- 
fiscations threatened,  sometimes  in  constitutions,  some- 
times in  statutes,  and  sometimes  in  judicial  decisions.  But 
in  spite  of  all  this,  the  practical  outcome  has  been  every- 
where the  same.  A bare  mention  of  the  States  of  New 
York,  Pennsylvania,  Texas,  the  six  New  England  States 
taken  as  one,  the  territory  southwest  of  St.  Louis,  and  the 


74 

State  of  California,  and  the  most  cursory  consideration  uf 
the  railway  situation  in  those  territories,  severally  illus- 
trates to  a demonstration  the  truth  of  all  that  is  here 
claimed — the  entire  futility  of  attempts  to  prevent  by  stat- 
ute and  judicial  decision  what  in  the  nature  of  things  can- 
not thus  be  prevented. 

Of  all  this  the  Court  will  so  far  take  at  least  a quasi 
judicial  notice,  that  I shall  not  go  State  by  State  and  sys- 
tem by  system  into  detail.  It  might  be  done  if  it  were 
necessary  in  order  to  get  the  view  I seek  to  present  fully 
before  the  Court;  and  it  could  be  done  to  the  clearest 
mathematical  demonstration  if  it  were  proper,  but  it  wouid 
far  exceed  the  limits  of  any  brief  that  ever  was  written. 

Legislative  and  No  truth  was  ever  any  truer  than  this,  and  it  needs  only 
judicial  opposi- 
tion ineffective,  to  be  stated.  Railway  consolidations  in  the  United  States 

have  gone  on  and  been  made  effective  in  face  of  all  the 
opposition,  legislative  and  judicial,  that  could  be  brought 
against  them.  This  opposition,  like  that  in  England,  has 
perhaps  at  times  somewhat  “hindered  and  thwarted” 
them,  but  it  has  not  “prevented”  them.  It  is  difficult  then 
to  see  what  useful  purpose  the  opposition  has  served;  it 
has  not  been  successful,  and  thus  seems  to  have  been  mis- 
directed and  wasted  effort.  Where  it  has  caused  expense 
and  trouble  to  the  parties  concerned  it  has  been  something 
worse.  If  it  have  operated  merely  to  impede  economic 
advancement,  to  hamper  development  and  to  throw 


75 

blocks  under  the  wheels  of  human  progress,  it  was 
worse  than  a crime,  it  was  a blunder.  Prohibitory  and 
preventive  statutes  of  this  sort,  both  here  and  abroad,  to- 
gether with  the  judicial  decisions  which  attempt  to  en- 
force them,  have  become  in  only  some  few  years  after  the 
fact  obsolete.  The  world  moves  on  and  quite  away 
from  them,  and  in  total  disregard  of  them ; and  presently 
they  are  treated  by  one  of  the  taxidermists  and  find  shelf- 
room  as  legal  curios  or  mere  antiques  in  the  cabinets  of 
collectors  of  judicial  and  legislative  curiosities.  The  stat- 
ute books  and  the  report-books  are  full  of  such  legal  mum- 
mies. 

We  have  found  it  so  in  every  part  of  the  world. 

IV. 

» 

Any  statute  which  opposes  itself  to  such  a trend  or  ten- 
dency in  railway  development  is  economically  unsound. 
Such  unsoundness  is  not  to  be  presumed  of  any  general  fed- 
eral statute;  and  when  one  construction  of  such  a statute 
puts  it  in  opposition  to  such  trend  or  tendency,  while 
another,  equally  open  to  the  court,  puts  it  in  harmony  there- 
with, the  Court  is  remitted  to  the  latter  construction. 

That  such  a statute,  if  it  squarely  and  unmistakably 
opposes  itself  to  this  tendency  of  railways  in  the  same 
territory  to  combine,  would  be  unsound  from  an  economic 


76 

point  of  view,  follows  from  the  fact  that  statutes  rightly 
conceived  declare  public  policy  and  do  not  attempt  to 
thwart  or  hinder  irresistible  forces  in  economics,  and  do 
not  attempt  to  stay  what  is  inevitable.  It  is  not  arguable 
that  railway  combination  is  mala  in  se,  and,  therefore,  it 
is  not  to  be  pretended  that  such  consolidations,  like  rape 
or  murder  and  the  like,  are  outbreaks  of  original  sin  to 
be  held  in  check  as  much  as  may  be  by  the  strong  arm. 
No  time,  therefore,  need  be  wasted  over  that.  In  con- 
sideration of  what  has  gone  before  in  this  argument,  I 
shall  assume  at  this  point  that  it  need  not  be  further  in- 
sisted that  statutes  of  this  character  which  fly  in  the  face 
of  gravitation  and  the  inevitable  are  unsound  and  im- 
politic. 

Such  unsoundness  and  impolity  is  not  to  be  presumed  of 
any  general  federal  statute.  (Cooley’s  Const.  Limit.  (6th 
ed.),  pp.  218,  219.)  There  is  every  presumption  that  the 
Congress  acted  wisely  and  judiciously  in  passing  the  act, 
and  that  it  proceeded  to  this  legislation  in  the  full  light  of 
all  the  facts  hereinbefore  set  out.  Considerations  of  public 
policy  in  such  a case  as  this  being  constitutional  considera- 
tions, if  the  statute  in  question  be  open  to  a construction 
which  will  bring  it  into  harmony  with  constitutional  prin- 
ciples and  intendments,  it  is  the  right  and  the  duty  of  this 
Court  so  to  construe  it.  The  rule  of  construction  for  which 
I here  contend  is  one  heretofore  frequently  announced  and 
approved  by  this  Court. 


77 

In  Grenada  County  Supervisors  v.  Br ogden,  (112  U.  S. 

261,  268)  the  Court  says: 

“It  certainly  cannot  be  said  that  a different  con- 
struction is  required  by  the  obvious  import  of  the 
words  of  the  statute.  But  if  there  were  room  for 
two  constructions,  both  equally  obvious  and  rea- 
sonable, the  Court  must,  in  deference  to  the  legis- 
lature of  the  state,  assume  that  it  did  not  overlook 
the  provisions  of  the  constitution,  and  designed  the 
act  of  1871  to  take  effect.  Our  duty,  therefore,  is 
to  adopt  that  construction  which,  without  doing 
violence  to  the  fair  meaning  of  the  words  used, 
brings  the  statute  into  harmony  with  the  provisions 
of  the  constitution.  Cooley  Const.  Limit.,  184,  185  ; 
Newland  v.  Marsh , 19  111.  384;  People  v.  Supervisors , 
17  N.  Y.  241 ; Colwell  v.  May,  4 C.  E.  Green,  249. 
And  such  is  the  rule  recognized  by  the  supreme 
court  of  Mississippi  in  Marshall  v.  Grimes,  41  Miss. 
27,  31,  in  which  it  was  said:  ‘General  words  in  the 
act  should  not  be  so  construed  as  to  give  an  effect 
to  it  beyond  the  legislative  power,  and  thereby  ren- 
der the  act  unconstitutional.  But,  if  possible,  a 
construction  should  be  given  to  it  that  will  render 
it  free  from  constitutional  objection;  and  the  pre- 
sumption must  be  that  the  legislature  intended  to 


Grenada  County 
Supervisors  v. 
Brogden,  (112 
U.  S.  261) 


Hawaii  v.  Man- 
kichi,  (190  U.  S. 
197.) 


78 

grant  such  rights  as  are  legitimately  within  its 
power.’  Again,  in  Sykes  v.  Mayor,  55  Miss.  115, 
143 : ‘It  ought  never  to  be  assumed  that  the  law- 
making department  of  the  government  intended  to 
usurp  or  assume  power  prohibited  to  it.  And  such 
construction  (if  the  words  will  admit  of  it)  ought 
to  be  put  on  its  legislation  as  will  make  it  consistent 
with  the  supreme  law.’  ” 

In  the  case  of  Hawaii  v.  Mankichi  (190  U.  S.  197,  212) 
the  same  rule  is  declared  and  enforced,  and  the  following 
language  from  the  opinion  of  Mr.  Justice  Brown  is,  it  is 
submitted,  peculiarly  applicable  to  the  case  at  bar: 

“Without  going  back  to  the  famous  case  of  the 
drawing  of  blood  in  the  streets  of  Bologna,  the 
books  are  full  of  authorities  to  the  effect  that  the 
intention  of  the  law-making  power  will  prevail,  even 
against  the  letter  of  the  statute,  or,  as  tersely  ex- 
pressed by  Mr.  Justice  Swayne  in  Smythe  v.  Fiske, 
23  Wall.  374,  380,  23  L.  Ed.  47,  49 : ‘A  thing  may 
be  within  the  letter  of  a statute  and  not  within  its 
meaning,  and  within  its  meaning,  though  not  within 
its  letter.  The  intention  of  the  lawmaker  is  the 
law.’  A parallel  expression  is  found  in  the  opinion 
of  Mr.  Chief  Justice  Thompson  of  the  supreme  court 
of  the  state  of  New  York  (subsequently  Mr.  Justice 


79 

Thompson  of  this  court),  in  People  v.  Utica  Ins.  Co., 
15  Johns,  358,  381,  8 Am.  Dec.  243:  ‘A  thing 
which  is  within  the  intention  of  the  makers  of  a 
statute  is  as  much  within  the  statute  as  if  it  were 
within  the  letter;  and  a thing  which  is  within  the 
letter  of  the  statute  is  not  within  the  statute,  unless 
it  be  within  the  intention  of  the  makers.’ 

“Without  going  farther,  numerous  illustrations  of 
this  maxim  are  found  in  the  reports  of  our  own 
court.  Nowhere  is  the  doctrine  more  broadly  stat- 
ed than  in  United  States  v.  Kirby,  7 Wall.  482,  19 
L.  Ed.  278,  in  which  an  act  of  Congress,  providing 
that  if  ‘any  person  shall  knowingly  and  willfully  ob- 
struct or  retard  the  passage  of  the  mail,  or  of  any 
driver  or  carrier,’  was  held  not  to  apply  to  a state 
officer  who  held  a warrant  of  arrest  against  a carrier 
for  murder,  the  Court  observing  that  no  officer 
of  the  United  States  was  placed  by  his  position 
above  responsibility  to  the  legal  tribunals  of  the 
country,  and  to  the  ordinary  processes  for  his  arrest 
and  detention  when  accused  of  felony.  ‘All  laws/ 
said  the  Court,  ‘should  receive  a sensible  construc- 
tion. General  terms  should  be  so  limited  in  their 
application  as  not  to  lead  to  injustice,  oppression,  or 
an  absurd  consequence.  It  will  always,  therefore,  be 
presumed  that  the  legislature  intended  exceptions  to 


8o 


its  language,  which  would  avoid  results  of  this  char- 
acter. The  reason  of  the  law  in  such  cases  should  pre- 
vail over  its  letter.'  A case  was  cited  from  Plowden, 
holding  that  a statute  which  punished  a prisoner 
as  a felon  who  broke  prison  did  not  extend  to  a 
prisoner  who  broke  out  when  the  prison  was  on 
fire,  ‘for  he  is  not  to  be  hanged  because  he  would 
not  stay  to  be  burned/  Similar  language  to  that 
in  Kirby's  Case  was  used  in  Carlisle  v.  United  States , 
16  Wall,  147,  153,  21  L.  Ed.  426,  429. 

“In  Atkins  v.  Fibre  Disintegrating  Co.,  18  Wall. 
272,  21  L.  Ed.  841,  it  was  held  that  a suit  in  per- 
sonam in  admiralty  was  not  a ‘civil  suit’  within  the 
nth  section  of  the  judiciary  act,  though  clearly  a 
civil  suit  in  the  general  sense  of  that  phrase,  and  as 
used  in  other  sections  of  the  same  act.  See,  also, 
Re  Louisville  Underwriters,  134  U.  S.  488,  33  L.  Ed. 
991,  10  Sup.  Ct.  Rep.  587.  So  in  Heydenfeldt  v. 
Daney  Gold  & Silver  Min.  Co.,  93  U.  S.  634,  638,  23 
E.  Ed.  995,  996,  it  was  said  by  Mr.  Justice  Davis: 
‘If  a literal  interpretation  of  any  part  of  it  (a  statute) 
would  operate  unjustly,  or  lead  to  absurd  residts,  or 
be  contrary  to  the  evident  meaning  of  the  act  taken 
as  a whole,  it  should  be  rejected.  There  is  no  better 
way  of  discovering  its  true  meaning,  when  expres- 
sions in  it  are  rendered  ambiguous  by  their  connec- 


8i 


tion  with  other  clauses,  than  by  considering  the  ne- 
cessity for  it,  and  the  causes  which  induced  its  en- 
actment.' To  the  same  effect  are  the  Church  of 
Holy  Trinity  v.  United  States,  143  U.  S.  457,  36  E. 
Ed.  226,  12  Sup.  Ct..  Rep.  51 1,  in  which  many  cases 
are  cited  and  reviewed,  and  Lau  Ow  Bew.  v.  United 
States,  144  U.  S.  47,  59.  In  this  latter  case  it  was 
held  that  a statute  requiring  the  permission  of  the 
Chinese  government,  and  the  identification  of  ‘every 
Chinese  person  other  than  a laborer,  who  may  be 
entitled  by  said  treaty  or  this  act  (of  Congress)  to 
come  within  the  United  States,’  did  not  apply  to 
‘Chinese  merchants  already  domiciled  in  the  United 
States,  who,  having  left  the  country  for  temporary 
purposes,  animo  revertendi,  seek  to  re-enter  it  on 
their  return  to  their  business  and  their  homes.' 
Said  the  Chief  Justice:  ‘Nothing  is  better  settled 
than  that  statutes  should  receive  a sensible  con- 
struction, such  as  will  effectuate  the  legislative 
intention,  and,  if  possible,  so  as  to  avoid  an  unjust 
or  an  absurd  conclusion .’ 

“Two  recent  English  cases  are  instructive  in  this 
connection : In  Plumstead  Board  of  Works  v. 

S packman,  L.  R.  13  Q.  B.  Div.  878,  887,  it  was  said 
by  the  Master  of  Rolls,  afterwards  Lord  Esher:  ‘If 
there  are  no  means  of  avoiding  such  an  interpreta- 


82 


tion  of  the  statute’  (as  will  amount  to  a great  hard- 
ship), ‘a  judge  must  come  to  the  conclusion  that  the 
legislature  by  inadvertence  has  committed  an  act  of 
legislative  injustice ; but,  to  my  mind,  a judge  ought 
to  struggle  with  all  the  intellect  that  he  has,  and  with 
all  the  vigor  of  mind  that  he  has,  against  such  an 
interpretation  of  an  act  of  Parliament;  and  unless 
he  is  forced  to  come  to  a contrary  conclusion,  he  ought 
to  assume  that  it  is  impossible  that  the  legislature  could 
have  so  intended See,  also,  Ex  parte  Walton,  L.  R. 
17  Ch.  Div.  746.” 

When  a statute  is  unambiguous,  and  incapable  or  insus- 
ceptible of  more  than  one  construction — that  is  to  say, 
when  there  is  nothing  to  construe,  and  only  one  possible 
meaning  to  the  language  used — it  is  for  the  Court  to  en- 
force it  without  regard  to  the  wisdom  or  unwisdom,  the 
polity  or  impolity,  of  the  statute  as  legislation.  But  when- 
ever a statute  is  open  to  construction  it  is  the  duty  of  the 
Court  to  construe  it ; and  when  it  is  open  to  two  construc- 
tions, it  is  for  such  a court  as  this  to  construe  it  in  the 
light  of  all  the  circumstances  and  conditions  involved,  in 
the  light  of  right  reason,  and  so  as  to  make  it  run  in 
harmony  with  constitutional  principles — implied  as  well 
as  express,  equitable  as  well  as  strict — if  it  can  in  any  way 
be  done  without  doing  violence  to  the  meaning  of  the 
words. 


83 

In  the  light  of  Mr.  Justice  White’s  dissenting  opinion 
in  United  States  v.  Trans-Missouri  Freight  Association,  (166 
U.  S.  290,  343),  it  is  respectfully  submitted  that  the  statute 
in  question  comes  within  this  rule  and  is  certainly  suscep- 
tible of  two  constructions.  That  opinion  suggests  that  it 
is  possible  for  judicial  minds  to  take  contrary  views  as  to 
the  proper  force  and  meaning  of  this  statute,  as  well  as 
upon  the  general  questions  at  issue.  To  the  same  point 
may  be  cited  the  decision  of  Lochren,  J.,  in  State  of  Min- 
nesota v.  Northern  Securities  Co.,  (123  Fed.  Rep.  692.) 

It  may  here  be  pointed  out  that  this  statute  is  not  un- 
constitutional— in  the  equitable  sense  in  which  that  term 
is  used  in  this  argument — unless  the  Court  construe  uncon- 
stitutionality into  it.  To  affirm  the  decision  in  this  case 
would  be  the  same  thing  in  fact  as  to  declare  the  statute 
inoperative  and  void,  because  that  would  be  to  put  a con- 
struction on  it  which  would  render  it  ineffective,  inopera- 
tive and  void.  It  would  set  it  to  do  an  impossible  task, 
to  stay  something  which  cannot  be  stayed,  and  that  is  ju- 
dicial absurdity,  to  be  avoided  whenever  possible  on  the 
authority  of  the  cases  above  referred  to. 

While  statutes  are  not  to  be  tested  by  the  courts  by  any 
mere  rule  of  public  policy,  and  thus  be  made  to  stand  or 
fall  solely  on  that  ground,  it  is  still  true,  leaving  constitu- 
tional limitations  for  the  moment  out  of  view,  that  the  con- 
struction of  a statute  is  properly  so  tested ; and  that  wher- 


U S.  v.  Trans- 
Mo.  Asso  , (166 
U.  S.  290.) 


Minn,  v Nor 
Sec.  Co.,  (123 
Fed.  Rep.  692.) 


84 

ever  any  statute  is  open  to  two  constructions  it  is  proper 
to  urge  considerations  of  public  policy  in  favor  of  one 
construction  and  against  the  other,  which  considerations 
may  properly  be  controlling. 

When  a court  is  called  upon  to  declare  a statute  uncon- 
stitutional— using  that  word  now  strictly — it  goes  to  the 
farthest  verge  of  construction  to  sustain  it.  By  analogy 
it  ought  in  this  case,  being  confronted  with  the  situation 
as  it  is,  to  adopt  any  shift  to  avoid  a construction  which 
makes  the  statute  a practical  nullity,  or  which  makes  it 
equitably  unconstitutional  and  involves  judicial  absurdity. 
(Cooley’s  Const.  Limit.  (6th  Ed.),  216,  217.) 

In  the  phrase  of  Lord  Esher,  “a  judge  ought  to  strug- 
gle with  all  the  intellect  that  he  has,  and  with  all  the  vigor 
of  mind  that  he  has,  against  such  an  interpretation.” 

piumstead  Bd.  ( Plumstead  Board  of  Works  v.  S packman,  L.  R.  13,  Q.  B. 

of  Works  v. 

Spackman,  L.  R.  Div.  878,  887.) 

13,  Q.  B.  Div. 

878.  As  between  two  constructions  of  this  statute  which  are 

equally  open  to  it,  we  ask  that  the  court  shall  choose  that 
one  which  is  consonant  along  broad  lines  with  the  most 
enlightened  modern  public  policy,  and  reject  the  one 
which  drives  it  into  the  predicament  of  declaring  contrary 
to  public  policy  as  matter  of  law,  something  which  is  dem- 
onstrably not  contrary  to  public  policy  as  matter  of  fact 
— which  is  perhaps  only  another  way  of  asking  the  court 
not  to  render  a decision  herein  which  will  be  a brutum 


85 

fulmen  in  fact,  however  sound  it  may  seem  to  be  as  mere 
matter  of  law. 

Moreover,  this  particular  statute,  as  now  construed  and 
sought  to  be  enforced,  is  dead  and  past  galvanizing  back 
to  life,  at  this  late  day,  by  any  amount  of  judicial  decision. 
As  legislation  it  is  in  its  present  shape  as  dead  as  the 
Fugitive-slave  law.  Let  us  see.  It  is  legislation  levelled 
at  combinations  in  restraint  of  trade ; it  has  been  the  law  of 
the  land  for  more  than  thirteen  years ; it  has  been  invoked 
repeatedly  in  the  course  of  litigation  against  what  are 
popularly  known  as  “trusts” ; as  now  construed  it  has  never 
yet  destroyed  a single  such  combination  nor  prevented  the 
creation  of  one.  Let  us  get  at  the  exact  truth.  In  July, 
1890,  when  the  act  was  passed,  there  were  in  the  United 
States  about  an  even  dozen  “trusts.”  Now,  after  more 
than  thirteen  years  every  one  of  these  original  trusts  still 
exists,  and  more  than  one  hundred  others  have  been  cre- 
ated in  the  meantime — more  than  an  hundred  by  actual 
count.  The  statute,  therefore,  has  not  had  any  tendency 
to  check  the  promotion  and  organization  of  trusts.  So 
far,  therefore,  it  has  in  practice  proved  valueless.  It  for- 
bids something  in  terms  which  it  has  not  the  slightest  ten- 
dency to  prevent.  From  that  point  of  view  it  is,  therefore, 
a fatuous  enactment.  Such  statutes  tend  to  bring  the  law 
into  discredit  if  not  contempt  with  plain  people. 


“Innocuous 

desuetude.” 


86 

But  this  is  only  one  feature  of  the  subject.  It  may  be 
said — although  that  does  not  at  all  meet  the  difficulty  in 
this  case — that  no  statute  is  self-enforcing;  and  that  it  is 
not  conclusive  merely  to  say  that  a law  is  not  obeyed. 
Let  us  proceed  then  to  a consideration  of  the  cases  in 
which  an  enforcement  of  the  statute  has  been  attempted 
in  the  courts.  A careful  examination  of  every  reported 
case  in  which  the  act  has  been  sued  upon  discloses  the 
fact  that  it  has  proved  of  not  the  slightest  use  in  efforts 

Official  list  of  to  destroy  “trusts.”  An  official  list  of  such  cases,  put  out 
decisions  to  end 

of  1902.  by  the  Department  of  Justice,  comes  down  nearly  to  the 

end  of  the  year  1902,  and  subsequent  search  has  brought 
it  quite  down  to  the  moment  of  putting  this  brief  to  press. 
All  the  cases  have  been  examined.  In  a considerable 
majority  of  the  cases  where  suit  has  been  brought  under 
the  act  the  plaintiff  has  been  defeated;  in  a few  of  them 
some  relief  has  been  obtained  against  combinations  of 
laboring  men ; some  of  the  cases  have  been  substantially  a 
draw ; and  in  every  one  of  the  remaining  cases — being  all 
the  cases  where  anything  substantial  has  been  accom- 
plished by  the  litigation — it  is  found  that  the  injury  com- 
plained of  was  illegal  at  common  law,  and  that  the  plaintiff 
would  have  recovered  just  as  well  without  the  statute  as 
with  it.  The  statute,  therefore,  when  invoked  in  the 
courts,  has  proved  to  be  utterly  valueless. 


87 

It  is  not  exaggeration  or  intemperance  to  say  of  such  a 
statute  that  it  is  as  dead  as  the  laws  of  Carthage,  and  that 
judicial  decisions  that  have  attempted  or  may  in  future 
attempt  to  put  the  breath  of  life  into  it  will  in  no  long 
time  take  rank  with  the  Dred-Scott  decision.  They  will 
form  no  part  of  the  living  body  of  law  for  us  in  these 
United  States.  So  far  as  the  statute  has  had  the  sem- 
blance of  life  hitherto,  so  far  as  it  has  seemed  to  move  and 
have  a being  in  our  legal  system,  it  has  been  only  a dis- 
turbing element;  it  has  perhaps  thwarted  and  hindered  a 
little,  but  it  has  not  prevented  the  economic  evolution  of 
our  business  affairs.  Its  pseudo-activity  has  been  mere 
agitation,  and  these  agitations  have — to  take  a phrase 
from  one  of  Macaulay’s  Essays — “resembled  the  grinnings 
and  writhings  of  a galvanized  corpse,  not  the  struggles  of 
an  athletic  man.” 

As  was  written  to  the  angel  of  the  apocalyptic  church 
in  Sardis,  so  it  may  be  said  of  this  statute:  “Thou  hast  a 
name  that  thou  livest,  and  art  dead.”  If,  therefore,  the 
Act  of  July  2,  1890  (26  Stat.  at  Large,  209),  is  hereafter 
to  serve  any  useful  purpose  as  a living  law,  it  is  high  time 
for  courts  that  are  called  upon  to  construe  it,  to  “be 
watchful  and  strengthen  the  things  which  remain,  that  are 
ready  to  die” — lest  presently  it  be  like  Lazarus  after  he  had 
lain  in  the  grave  four  days.  From  another  point  of  view 
it  is  very  much  like  Sir  Thomas  Lipton,  who,  having  sev- 


88 

eral  times  failed  to  carry  off  the  Cup,  is  now  advised  bv 
his  more  judicious  friends  to  desist,  before  his  efforts  be- 
come a laughing  stock.  It  was  probably  laudable  in  him 
to  try ; it  will  be  wise  for  him  to  stop  before  “all  men  begin 
to  mock,  and  say  this  man  began  to  build  and  was  not 
able  to  finish.” 

The  impeach-  'phis  statute,  therefore,  as  now  construed,  stands  im- 

ment  of  the 

statute.  peached  at  the  bar  of  this  court  as  an  anachronism,  as  a 

mere  interference  with  trade  and  commerce,  and  as  useless 
and  out  of  touch  with  the  modern  trend  of  human  indus- 
try. The  contention  that  the  validity  and  lawfulness  of 
contracts  or  combinations  in  restraint  of  trade  as  forbidden 
by  a statute  in  this  country  and  in  this  year  of  grace  do  not 
depend  upon  any  consideration  of  reasonableness  or  un- 
reasonableness in  the  restraint  is  anomalous,  anachronical 
and  absurd.  It  has  about  it  the  old  clatter  of  the  rack  and 
chains ; and  such  a statute  is  as  really  unenforceable  among 
a free  people — and  it  ought  to  be — as  a statute  which 
should  now  attempt  to  punish  witchcraft  or  poaching  with 
death.  The  manifest  reasonableness  of  this  view  seems  to 
commend  it  to  all  men  who  take  an  intelligent  view  of  the 
past,  appreciate  the  significance  of  the  present  and  exercise 
a scientific  imagination  with  regard  to  the  future. 

“The  tendency  of  modern  thought  and  decisions 
has  been  no  longer  to  uphold  in  its  strictness  the 
doctrine  which  formerly  prevailed  respecting  agree- 


89 

ments  in  restraint  of  trade.  The  severity  with  which 
such  agreements  were  treated  in  the  beginning  has 
relaxed  more  and  more  by  exceptions  and  qualifica- 
tions, and  a gradual  change  has  taken  place, 
brought  about  by  the  growth  of  industrial  activi- 
ties, and  the  enlargement  of  commercial  facilities 
which  tend  to  render  such  agreements  less  danger- 
ous, because  monopolies  are  less  easy  of  accomplish- 
ment.” (Beach’s  Modern  Law  of  Contracts,  sec. 
1 569 ; quoted  and  approved  by  Mr.  Justice  White 
and  referred  to  by  him  as  a statement  of  “the  mod- 
ern and  American  rule  on  the  subject,”  in  United 
States  v.  Trans -Missouri  Freight  Association,  166 
U.  S.  290,  347,  348.) 

The  warfare  that  the  politicians  and  the  people  are  now 
waging  in  this  country  against  what  they  call  “trusts,”  is 
a phase  of  the  eternal  struggle  between  Individualism  and 
Collectivism — a struggle  common  to  almost  every  nation 
af  some  period  of  its  history.  Fortunately  for  the  race,  the 
battle  is  generally  fought  out  and  won  once  for  all,  and 
the  individual  ultimately  finds  his  proper  place  in  an  or- 
ganized community.  Unless  the  State  disintegrates  that  is 
the  only  and  inevitable  solution.  Wherever  in  any  age  or 
country  Individualism  makes  the  fight  so  as  to  render 
Collectivism  impossible,  there  follows  a gradual  blight  of 
public  spirit,  a slow  deterioration  of  national  character,  a 


Individualism  v. 
Collectivism. 


90 

sapping  of  energy  and  a sure  progression  toward  final  na- 
tional extinction.  This  is  exceptionally  and  strikingly  il- 
lustrated in  the  history  of  the  republic  of  Florence — a 
short,  sad  history  in  spite  of  its  brilliant  artistic  and  lit- 
erary successes,  as  well  as  its  financial  and  military  tri- 
umphs. Whether  one  takes  a dramatic  or  a scientific  in- 
terest in  the  story — whether  it  is  tragedy  or  comedy  to  the 
reader — it  points  the  same  moral,  a moral  instructive  both 
of  itself  and  by  comparison,  and  one  fit  to  be  recalled  in 
the  consideration  of  the  material  and  practical  questions 
which  this  litigation  involves.  Florentine  Individualism, 
the  statecraft  of  Machiavelli  and  the  personalism  of  the 
Medici  and  other  great  families  made  Collectivism  impos- 
sible in  Florence,  and  Florence  fell.  At  the  very  time 
when  this  was  going  on  in  Tuscany  the  Collectivism  of 
Louis  XI.  and  of  Edward  III.  was  laying  foundation  for 
the  strength  of  modern  France  and  England,  so  that  in 
our  day  Florence,  with  all  her  splendid  achievement  in 
art  and  letters,  in  finance  and  government,  is  little  more 
than  a faded  vision,  while  France  and  Britain,  that  builded 
better  than  the  Tuscan,  have  preserved  the  continuity  of 
their  existence  as  independent  States  and  stand  erect  and 
virile  in  the  forefront  of  human  progress.  So  equally  of 
every  other  modern  state  where  the  battle  has  been  fought 
out  and  won  in  the  same  way.  We  are  in  no  danger  in 
this  country  of  losing  the  fight  for  a conservative  Collec- 


9i 

tivism,  and  all  this  is  for  us  merely  academic,  but  the  pos- 
sibilities of  evil  for  us  if  we  should  fail  in  the  fight,  may 
well  give  radicals  pause. 

It  will  not,  I hope,  be  regarded  improper  to  argue  this 

case  in  this  way  on  grounds  of  public  policy,  inasmuch  as 

the  Court,  in  the  opinion  in  the  case  of  the  United  States 

v.  Trans-Missouri  Freight  Association , (166  U.  S.  290),  u-  s-  v-  Trans- 

Mo.  Asso.,  (166 

based  their  decision  as  it  seems,  to  some  extent  at  least,  on  u.  S.  290.) 
such  grounds.  At  page  340,  Mr.  Justice  Peckham  says: 

“We  are  asked  to  read  into  the  act,  by  way  of 
judicial  legislation,  an  exception  that  is  not  placed 
there  by  the  law-making  branch  of  the  government, 
and  this  is  to  be  done  upon  the  theory  that  the 
impolicy  of  such  legislation  is  so  clear  that  it  can- 
not be  supposed  congress  intended  the  natural  im- 
port of  the  language  it  used.  This  we  cannot 
and  ought  not  to  do.  That  impolicy  is  not  so 
clear,  nor  are  the  reasons  for  the  exception  so  po- 
tent as  to  permit  us  to  interpolate  an  exception  into 
the  language  of  the  act,  and  to  thus  materially  alter 
its  meaning  and  effect.  It  may  be  that  the  policy 
evidenced  by  the  passage  of  the  act  itself  will,  if  car- 
ried out,  result  in  disaster  to  the  roads,  and  in  a 
failure  to  secure  the  advantages  sought  from  such 
legislation.  Whether  that  will  be  the  result  or  not 
we  do  not  know  and  cannot  predict.  These  con- 


92 

siderations  are,  however,  not  for  us.  If  the  act 
ought  to  read  as  contended  for  by  defendants,  con- 
gress is  the  body  to  amend  it,  and  not  this  Court,  by 
a process  of  judicial  legislation  wholly  unjustifiable. 
Large  numbers  do  not  agree  that  the  view  taken  by 
defendants  is  sound  or  true  in  substance,  and  con- 
gress may,  and  very  probably  did,  share  in  that  be- 
lief in  passing  the  act.  The  public  policy  of  the 
government  is  to  be  found  in  its  statutes,  and,  when 
they  have  not  directly  spoken,  then  in  the  decision 
of  the  courts  and  the  constant  practice  of  the  gov- 
ernment officials;  but  when  the  law-making  power 
speaks  upon  a particular  subject,  over  which  it  has 
constitutional  power  to  legislate,  public  policy  in 
such  a case  is  what  the  statute  enacts.  If  the  law 
prohibit  any  contract  or  combination  in  restraint 
of  trade  or  commerce,  a contract  or  combination 
made  in  violation  of  such  law  is  void,  whatever  may 
have  been  theretofore  decided  by  the  courts  to  have 
been  the  public  policy  of  the  country  on  that  sub- 
ject.” 

CONCLUSION. 

It  is  respectfully  submitted  that  grounds  are  here  urged 
to  the  court  which  lay  a foundation  for  such  a modification 
of  the  views  above  expressed  as  will  justify  a distinction 


93 

of  this  case  from  the  Trans-Missouri  Freight  Association 
case,  to  the  extent  of  an  adjudication  upon  this  appeal, 
that,  in  the  case  of  railway  combinations  such  as  the  one 
at  bar,  either  that  the  Statute  is  not  applicable,  or  if  it  be 
applicable,  that  not  all  restraint  of  trade,  but  only  unlawful, 
unreasonable  or  injurious  restraint  is  here  within  its  proper 
purview.  Such  a decision  in  this  case  will  put  the  statute 
in  harmony  with  the  actual  conditions  surrounding  the 
growth  and  development  of  American  railways,  and  will 
harmonize  our  attitude  with  that  of  England  and  of  France 
and  of  other  countries  where  these  questions  have  earlier 
arisen  and  where  they  have  been  settled  along  the  lines 
for  which  I here  contend.  With  such  an  interpretation, 
brought  fairly  into  line  with  modern  conditions,  and  made 
to  square  with  the  eternal  verities,  this  statute  may  still 
have  life  and  may  yet  serve  a useful  purpose  in  our  corpus 
juris.  If  given  a practicable  construction  it  may  be  en- 
forced and  so  may  cease  to  be  a dead  letter. 

It  is  not  now  necessary  that  we  should  go  to  the  full 
length  of  absolute  Government  ownership  and  operation; 
but,  if  the  experience  of  all  the  rest  of  mankind  is  good 
for  anything,  it  is  necessary,  in  order  to  put  ourselves  in 
line  with  the  best  theory  and  practice,  that  like  France  and 
England  we  completely  eliminate  the  disturbing  element 
of  competition  between  our  privately-owned  and  operated 
lines,  that  we  legalize  consolidation  and  division  of  ter- 


94 

ritory  as  the  rest  of  the  world  has  done,  and  put  the  em- 
phasis of  our  future  effort  on  regulation,  rather  than  on 
repression,  on  securing  good  service  at  fair  rates,  and  on 
relieving  the  railway  companies  of  the  incubus  and  oppres- 
sion of  mere  governmental  intermeddling  with  their  finan- 
cial operations.  This  will  put  us  in  line  with  the  rest  of  the 
world. 

I hope  it  may  seem  to  the  court  that,  in  the  presentation 
of  the  historical  statement  upon  which  this  argument  is 
based,  I have  taken  the  case  in  this  aspect  of  it  out 
of  that  class  of  cases  wherein  arguments  from  con- 
siderations of  public  policy  fail  by  reason  of  the  necessary 
vagueness  and  uncertainty  of  the  rule  of  public  policy  in- 
voked. This  I insist  is  not  the  case  here.  It  is  not  the 
case  considered  by  Jessel,  M.  R.,  in  Besant  v.  Wood,  (12 

Besant  v.  Wood,  Chan.  Div.  60s,  620)  where  he  properly  argues  that  in  that 

(12  Chan.  Div. 

605.)  case,  and  in  all  such  cases,  public  policy  is  vety  much  a 

matter  of  individual  opinion,  and,  therefore,  not  a safe 
guide.  But  in  that  case  with  his  usual  incision  and  pre- 
ciseness of  view  the  Master  of  the  Rolls  declares  that  pub- 
lic policy  is  convention  and  that  it  is  a growth,  so  that  what 
was  yesterday  public  policy  is  not  necessarily  so  to-day, 
and  that  what  many  excellent  people  think  “very  horrible 
and  against  public  policy”  at  one  time  may  come  to  be 
regarded  by  everybody  as  confessedly  sound  and  sensible 
at  a later  time.  There  are  no  two  sides  to  the  specific 


95 

questions  of  public  policy  here  invoked  as  affecting  and 
determining  the  decision  of  this  case. 

I haven’t  looked  much  into  the  report-books  to  see 
whether  all  these  propositions  square  with  the  decided 
cases,  or  whether  decisions  in  point  are  to  be  found  proper 
to  be  cited  in  the  usual  way  in  their  support.  My  argu-  Gui  bono ? 
ment  is  in  a sense,  Cui  bono?  I haven’t  cited  many  au- 
thorities ; perhaps  there  are  none.  I have  tried  to  present 
a practical  view,  somewhat  extra-legal  perhaps,  but  not 
for  that  reason  the  less  worthy  of  being  taken  into  account 
in  the  decision  of  such  a case  as  this,  if  what  I have  sug- 
gested turn  out  to  have  the  only  merit  claimed  for  it; 
namely,  that  of  presenting  a plain  man’s  view  of  the  eco- 
nomic side  of  the  question.  I have  passed  by  the  law  and 
the  solemnities  of  legal  discussion,  and  have  treated  the 
facts.  It  is  as  who  should  say,  with  Emerson,  “Give  me 
health  and  a day  and  I will  make  the  pomp  of  emperors 
ridiculous,”  because  I have  felt  that,  in  dealing  with  these 
world-wide  economic  questions,  this  august  tribunal  would 
upon  this  appeal  look  past  the  precedents  and  beyond  the 
preachments  of  lawyers  and  law  courts,  in  order  to  deal  at 
first-hand  and  directly  with  the  naked  verities  of  the  situ- 
ation. 

Respectfully  submitted, 

Charles  F.  Beach,  Jun. 


RECENT  AND  PENDING  “TRUST”  LEGISLATION  AND  LITIGATION 
IN  THE  UNITED  STATES 


ADDRESS 

BY 

CHARLES  F.  BEACH,  Jun„ 


AT  THE 

UNIVERSITY  OF  MINNESOTA, 

FEBRUARY  13,  1903. 


ADDRESS 

OF 

Charles  F.  Beach,  Jun. 


Mr.  President  and  Gentlemen  of  the  University: 

At  the  present  moment  nothing  within  the  range  of  the 
modern  science  of  Economics  is  accorded  by  the  American 
public  such  general  attention  and  concern  as  what  we 
properly  or  improperly  call  “trusts.”  This  is  not  only  so 
now,  it  has  been  so  for  more  than  a dozen  years  past.  In 
fact,  now  for  near  half  a generation  of  men,  we,  the  people 
of  the  United  States,  have  been  exciting  ourselves  about 
aggregations  of  capital.  For  all  these  years  very  many  of 
us  have  talked  glibly  and  some  of  us  have  thought  seriously 
upon  the  subject.  We  began  about  the  year  1889,  or  a lit- 
tle earlier — on  the  crest  of  a wave  of  general  national 
prosperity — to  believe  or  to  affect  to  believe  that  our 
growing  and  crystallizing  monied-capital,  instead  of  being 
a blessing  and  a benefit,  was  a public  menace.  As  our 
trade  and  commerce  was  then  seen  to  be  outgrowing  its 
swaddling  clothes,  and  to  be  taking  on  the  form  and  mag- 
nitude of  maturity,  the  people  took  fright,  or  pretended 
to  take  fright;  and  instead  of  seeing  in  the  creation  of 
these  greater  financial  enterprises,  the  building  up  of  fiscal 
buttresses  that  were  to  enable  us  as  a nation  to  rise  out 
of  the  category  of  provinces  and  into  the  larger  rank  of 
world-powers,  the  people  scented  a public  peril  afar  off. 
The  great  trading,  manufacturing  and  carrying  companies 
and  combinations,  then  forming,  instead  of  being  regarded 
as  matters  of  congratulation  and  public  felicitation — 
something  to  be  fostered  and  encouraged  by  wise  laws 
and  the  most  enlightened  public  opinion— were  by  the 
unthinking  majority  of  the  people  set  down  with  sweep- 
ing generalization  as  something  to  be  feared,  something 
to  be  curtailed  and  emasculated,  to  be  cramped  and  crip- 
pled, in  the  public  interest,  by  all  such  restrictive  and  re- 


2 


pressive  legislation  and  litigation  as  could  be  devised 
against  them. 

Consequently,  upon  that  crude  theory  and  working  from 
the  bottom  upward,  the  people  addressed  themselves,  by 
the  mouth  of  their  press  and  by  the  hand  of  their  law 
courts  and  of  their  legislatures,  to  the  task  of  neutralizing 
and  undoing  as  much  as  possible  what  the  intelligence, 
enterprise,  capital  and  skill  of  the  commercial  community 
was  devising  for  the  increase  and  development  of  our 
resources  along  the  lines  of  modern  methods  in  trade  and 
commerce.  This  course  the  people  have  resolutely  pur- 
sued for  all  these  years,  and  are  still  pursuing.  The 
American  people,  speaking  by  the  voice  of  the  American 
politician,  seem  to  be  of  substantially  one  mind  upon  this 
question — not  to  build  Rome  but  to  destroy  Carthage. 
The  public  machinery  is  employed  without  stint  to  this 
end ; laws  galore  have  been  written  into  our  statute  books, 
and  countless  lawsuits  have  been  pressed  and  prosecuted 
all  to  the  same  end.  The  legislative  powers  and  the  ju- 
dicial enginery  alike  are  worked  at  high  pressure  every 
business  day  in  the  year  at  the  high  behest  of  the  American 
people  for  the  undoing  of  the  American  trust.  We  went 
in  for  it  long  years  ago,  and  we  are  still  hard  at  it. 

It  may  now  be  wise  to  stop  for  a moment  to  take  our 
bearings — as  a mariner  would  say,  to  take  the  sun,  or  a 
trader,  to  take  stock — in  order  that  we  may  see  what  it  is 
all  about,  to  ascertain  accurately  what  we  have  done  and 
how  far  we  have  progressed,  what  the  present  status  is  and 
what  the  fair  prospect  for  the  future.  If  we  shall  seem 
to  have  been  right  in  all  this  wordy  warfare,  we  shall  build 
ourselves  up  in  the  faith  and  edify  one  another  by  the  retro- 
spect; if  it  transpire  that  we  have  been  blindly  wrong, 
the  review  may  give  some  of  us  salutary  pause. 

We  mean,  popularly  speaking,  by  “trusts,”  all  combina- 
tions of  capital  larger  than  those  with  which  we  have  long 


3 

been  familiar  in  business  partnerships  and  in  the  ordinary- 
mercantile,  manufacturing  and  carrying  companies.  If 
this  speech  had  been  made  at  the  beginning  of  the  Nine- 
teenth instead  of  at  the  beginning  of  the  Twentieth  centu- 
ry, the  subject,  instead  of  being  Trusts — because  then  there 
were  no  trusts  and  very  little  capital  in  the  United  States 
— would  have  been  “Corporations,  a menace  to  the  com- 
monwealth.,,  Then  the  people  believed  that  the  creation 
and  growth  of  corporations  threatened  their  undoing,  just 
as  now  the  same  sort  of  people  affect  to  believe  that  trusts 
are  working  to  the  same  end.  In  view  of  what  mercantile, 
manufacturing  and  transportation  companies  have,  during 
the  past  half  century,  accomplished  for  the  material  de- 
velopment of  our  country  and  for  the  world  at  large,  it 
may  be  useful  to  recall  for  a moment  the  early  popular 
notions  concerning  them,  and  the  honest  belief  that  many 
sober  people  entertained  a century  ago  that  they  were 
fraught  with  all  sorts  of  possible  financial  and  economic 
evil. 

It  will  be  good  for  us  to  reflect  how  Mr.  Burr,  in  his 
effort  to  obtain  from  the  legislature  of  the  state  of  New 
York  a charter  for  a bank,  was  compelled,  in  order  to  pro- 
cure the  passage  of  his  bill  at  Albany,  to  charter  his  new 
bank  ostensibly  as  a water  company,  calling  it  the  Man- 
hattan Company,  giving  it  broadly  the  power  of  furnish- 
ing water  to  the  city  of  New  York,  and  conferring  upon 
it  banking  powers,  as  it  were,  incidentally.  So  it  comes 
to  pass  that  the  directors  of  the  present  Bank  of  the  Man- 
hattan Company  in  Wall  street  are,  in  compliance  with 
the  provisions  of  this  compromise  charter,  elected  every 
year  in  a little  room  in  Bowery,  which  is  maintained  as  the 
office  of  the  bank  as  a pseudo  water  company.  For  some 
reason  or  another,  now  hard  for  us  to  comprehend,  it  was 
in  those  days  supposed  that  corporations  having  banking 
powers  would  be  especially  pernicious,  and  the  greatest 


4 

hostility  was  at  that  time  manifested  towards  incorpora- 
tions of  this  character. 

Accordingly,  no  longer  ago  than  about  the  year  1840, 
and  thus  easily  within  the  memory  of  men  now  living,  in 
the  charter  of  the  Bowery  Savings  Bank  it  was  specifically 
stipulated  by  the  legislature  of  the  state  of  New  York,  as 
a condition  of  granting  the  charter,  that  the  deposits  of 
that  bank  should  not  at  any  time  exceed  five  hundred 
thousand  dollars,  and  that  the  real  and  personal  estate  of 
the  bank  should  never  exceed  the  annual  value  of  five 
thousand  dollars.  The  deviltry  the  bank  might  be  up  to  if 
its  deposits  were  allowed  to  exceed  half  a million  of  dol- 
lars the  fathers  regarded  as  a sound  reason  for  this  condi- 
tion in  the  charter,  and  they  took  no  chances  in  the  matter 
of  allowing  the  bank  to  acquire  realty — possibly  for  the 
reason  that  land  in  North  America  at  that  time  was  very 
scarce.  But,  be  that  as  it  may,  on  the  first  of  January  of 
the  present  year,  in  spite  of  all  this  astonishing  legisla- 
tion, the  assets  of  this  great  bank  reached  and  now  some- 
what exceed  eighty-eight  millions  of  dollars;  it  now  has 
one  hundred  and  forty  thousand  depositors ; in  sixty  years 
it  has  received  on  deposit  more  than  three  hundred  mil- 
lions of  dollars;  it  has  opened  more  than  nine  hundred 
thousand  accounts;  it  has  paid  out  in  dividends  nearly 
seventy  millions  of  dollars,  and  the  value  of  its  real  estate 
in  the  city  of  New  York  exceeds  three  hundred  thousand 
dollars  ; in  face  of  all  this  the  people  of  the  state  of  New 
York  are  still,  by  the  Grace  of  God,  free  and  independent. 
By  the  latest  report  of  the  Comptroller  of  the  Currency 
we  are  further  informed  that  there  are  in  the  United  States 
at  present  more  than  one  thousand  savings  banks,  with 
nearly  seven  millions  of  depositors  and  nearly  three  thou- 
sand millions  of  dollars  on  deposit.  What  would  the  rural 
solons  who 'cautiously  chartered  the  Bowery  Savings  Bank 
have  thought  of  that! 


So,  too,  we  recall  that  hostility  to  banking  corporations 
less  than  a hundred  years  ago  was  an  issue  sufficient  for  the 
platform  of  a political  party;  that  the  champions  of  the 
second  bank  of  the  United  States  in  the  days  of  President 
Jackson  were  not  strong  enough  to  save  it,  and  that  the 
political  fortunes  of  Senators  of  the  United  States  were 
made  and  unmade  according  to  their  views  upon  this 
momentous  question.  In  November,  1829,  when  the 
struggle  in  Congress  over  the  re-charter  of  the  bank  was 
raging,  Jackson  wrote  to  Nicholas  Biddle,  then  president 
of  the  bank,  as  follows : 

“I  think  it  right  to  be  perfectly  frank  with  you. 
I do  not  think  that  the  power  of  Congress  extends 
to  charter  a bank  out  of  the  ten-mile  square.  I do 
not  dislike  your  bank  any  more  than  all  banks.  But 
ever  since  I read  the  history  of  the  ‘South  Sea  Bub- 
ble’ I have  been  afraid  of  banks.” 

And  it  was  upon  this  key  that  under  the  hand  of  that 
masterful  man  the  legislation  of  the  period  proceeded. 
The  bank  which  had  been  exceptionally  useful  in  restoring 
order  to  the  finances  of  the  young  republic  was  sacrificed 
to  the  insane  idea  that  banks  meant  mischief.  All  this 
was  only  about  seventy-three  years  ago.  Now  we  have 
our  national  banking  system  with  all  its  benefits  to  the 
commercial  community;  and  now,  within  the  space  of  a 
human  lifetime,  the  folly,  the  imbecility,  the  fathomless 
idiocy  of  the  prejudice  against  the  institution  of  banks 
stands  confessed;  nobody  now  has  the  intellectual  hardi- 
hood to  attempt  the  slightest  justification  or  even  excuse 
for  it,  and  yet  then  it  possessed  many  of  the  best  people, 
and  everybody  short  of  the  very  best  people.  Then  Jack- 
son  was  reading  about  the  South  Sea  Bubble,  and  spelt 
out  of  what  he  read  that  banks  would  never  do ; now  peo- 
ple read  rubbish  in  old  English  books  about  ‘‘monopolies” 
and  conclude  that  trusts  are  to  be  the  end  of  us.  A cen- 
tury ago  the  good  people  of  the  country  were  having  the 


6 


same  sort  of  spasms  over  the  creation  of  corporations  and 
especially  of  banks  that  we  are  now  having  over  trusts  and 
combinations.  Sometimes  reflection  upon  the  facts  of  his- 
tory helps  one  to  keep  sane.  People  in  general  are  afraid 
of  what  they  are  not  used  to,  but  accept  as  of  course  what 
they  see  every  day.  Thus,  to  speak  profanely,  the  public 
is  in  some  sort  like  a pair  of  half-broken  colts,  that  shy  at 
an  automobile  or  a road-engine,  but  are  not  afraid  of  a 
load  of  hay  or  a boy  on  a sled.  Accordingly,  we  now  take 
banks — even  big  banks — down  at  a gulp ; but  have  as  yet 
no  stomach  for  ‘‘mergers.” 

We  may  note  at  this  point  that  the  public  are  now  exer- 
cised and  excited  about  trusts  without  smarting  under  any 
specific  injury  actually  and  presently  attributable  to  them, 
because  the  impression  is  abroad  that  trusts  are  in  some 
way  or  another  doing  or  are  about  to  do  a public  mischief. 
Senator  Hoar  has  just  said  that  “as  yet  there  has  been  only 
alarm  and  apprehension,  without  serious  injury.”  It  is 
significant  that  these  fears  in  regard  to  combinations  and 
incorporations  are  peculiarly  insular.  They  are  English 
to  the  back-bone;  it  is  John  Bull  every  inch  of  it.  We 
find  on  the  continent  comparatively  little  of  this  dread  of 
association.  The  unit  of  power  in  ancient  Europe  in  time 
of  war  was  the  Roman  Legion,  and  in  the  later  times  of 
peace  in  modern  Europe  business  and  commercial  guilds 
or  corporations  are  its  natural  successors.  But  in  insular 
England  there  has  always  been  a strong  dread  of  what  was 
called  “monopoly.”  Now,  in  point  of  fact,  a monopoly  is 
not  necessarily  an  evil,  it  may  be  a great  good.  Let  us  get 
that  well  into  our  heads.  The  monopolies  to  which  we 
are  accustomed  do  not  affright  us — do  not  even  seem  to  be 
monopolies,  such,  for  example,  as  governmental  monop- 
olies, the  monopolies  of  the  post  office,  of  patents,  of 
trade-marks,  and  of  copyrights,  monopolies  of  gas  and  wa- 
ter and  electric  lighting  companies,  of  telegraph  and  tele- 


7 


phone  companies,  and  of  railway  and  street  car  lines,  within 
the  limits  to  which  we  have  grown  accustomed. 

While  Lord  Coke  in  England  was  croaking  out  his 
mediaeval  nonsense  in  the  law  courts  against  monopolies, 
Queen  Elizabeth,  under  the  better  advice  of  Burleigh  and 
Bacon,  was  issuing  patents  to  those  great  companies  which 
strengthened  her  throne  and  added  infinitely  to  the  wealth 
and  resources  of  her  Kingdom.  So,  too,  at  a later  day, 
when  the  throne  of  William  III.  trembled  to  its  founda- 
tion, he  chartered  the  Bank  of  England,  the  greatest 
monopoly  at  that  time  in  that  country.  Thereby  he 
insured  to  his  house  a permanent  supremacy  and  laid  the 
foundation  for  the  modern  financial  strength  of  the  King- 
dom. By  that  act  he  at  once  steadied  himself  in  the  sad- 
dle, and  at  the  same  time  built  the  clearing  house  of  half 
the  world  in  Threadneedle  street.  So  that,  verily,  the 
throne  and  the  commercial  consequence  of  England  were 
founded  directly  upon  the  monopolies  of  Elizabeth  and 
William.  The  other  side  of  the  picture  is  Lord  Kenyon’s 
vituperative  charge  to  a jury  upon  the  trial  of  a poor  fel- 
low found  guilty  in  an  English  court  of  the  atrocious  crime 
of  buying  thirty  quarters  of  oats  and  of  endeavoring  to  sell 
them  again  in  open  market  at  a profit  of  two  shillings  per 
quarter;  and  Lord  Eldon’s  rubbishy  talk  about  a very- 
primitive  combination  in  the  London  market  to  control 
the  sale  of  certain  kinds  of  fruit  as  a “conspiracy  against 
the  world  at  large.” 

It  is,  moreover,  distinctly  a mistake  to  assume  that  mod- 
ern trusts  and  combinations  are  in  any  essential  sense  the 
successors  or  in  any  wise  near  of  kin  to  the  old  monopolies 
which  the  people  of  England  thought  that  they  dreaded. 
It  is  a mischievous  confusion  of  ideas  to  regard  as  “trusts” 
such  things  as  the  mediaeval  guilds,  the  famous  Copper 
Syndicate,  Conrad  Roth’s  sixteenth-century  corner  in  pep- 
per at  Augsburg,  the  Dutch,  French  and  English  East  In- 


8 


dies  companies,  and  the  numerous  middle-age  monopolies 
of  which  these  are  in  some  sort  types.  Inasmuch  as  such 
combinations  of  capital  as  we  understand  by  the  term 
trusts  are  from  a legal  point  of  view  absolutely  new  con- 
trivances, the  legal  questions  which  their  creation  and  ex- 
istence raise  are  entirely  open  ones,  and  are  to  be  deter- 
mined for  us  here  and  now,  not  by  reference  to  ancient 
English  statutes  and  the  reading  of  what  Bentham  con- 
temptuously called  “the  report  books,”  but  rather  on  gen- 
eral considerations  of  equity,  expediency,  utility  and  public 
policy.  It  seems  to  me,  therefore,  that  the  strictly  legal 
arguments  attempted  to  be  made  against  trusts  have  been 
in  the  main  aside  from  the  point  really  at  issue.  The  old 
statutes  against  regrating  and  kindred  acts,  and  the  old 
common  law  notions  thereabout,  did  not  have  to  do  with 
any  such  mischiefs  as  their  citation  in  a latter-day  anti-trust 
argument  assumes.  Neither  are  decisions  of  thirty  or  sev- 
enty-five or  three  hundred  years  ago  available  for  such  an 
argument  except  by  way  of  a distinctly  strained  analogy 
What  Lord  Coke  or  Lord  Kenyon  thought  about  “con- 
spiracies” was  never  of  much  value  at  any  time,  and  is  cer- 
tainly of  no  value  now  in  fixing  the  legal  status  of  modern 
trusts. 

Very  many  causes  may  be  assigned  for  the  present  devel- 
opment of  the  present  day  combinations  of  capital.  It  is 
perhaps  trite  to  say  that  the  modern  trust,  like  the  earlier 
corporation,  is  grounded  in  a commercial  tendency,  which 
grows  out  of  a commercial  necessity.  Lender  primitive 
conditions  every  man  was  able  to  do  his  own  business  by 
himself  and  for  himself;  as  his  business  grew  he  got  a part- 
ner, and  so  created  a partnership;  later  on  corporations 
were  formed,  and  now,  when  the  ordinary  corporations  are 
in  some  sense  conceived  to  be  inadequate,  we  resort  to  a 
still  larger,  more  refined  and  more  complicated  organiza- 
tion of  capital.  It  is  a natural  and  inevitable  evolution. 


9 

It  is  perhaps  not  unfair  to  say,  on  such  a rostrum  as  this, 
that  chief  among  the  causes  to  be  assigned  for  the  present 
development  of  trusts  is  the  recent  communistic  trend  in 
the  legislation  in  this  country  affecting  corporations,  or, 
as  one  might  say,  aimed  at  corporations,  by  both  the  state 
and  the  federal  legislatures,  making  it  more  and  more 
difficult  to  form  them,  subjecting  them  more  and  more 
to  governmental  intermeddling  and  interference,  under  the 
guise  of  visitation  and  control,  increasing  their  taxation 
and  decreasing  their  earning  power,  and  checking  and 
hampering  them  in  every  thinkable  way  in  the  free  trans- 
action of  their  business.  This  has  done  much  to  induce 
the  formation  of  such  other  and  further  combinations  as 
seem  to  its  owners  likely  to  relieve  capital  from  what  they 
regard  unjust  and  injurious  restrictions,  not  imposed  upon 
the  whole  body  of  the  people  in  respect  to  their  business, 
but  which  it  is  unfortunately  the  tendency  of  our  modern 
legislation  to  impose  upon  corporations.  Every  winter 
every  legislature  in  the  country,  including  the  Federal 
Congress,  taxes  its  ingenuity  to  devise  some  new  scheme 
for  harassing  corporations,  and  in  so  far  as  trusts  seem  to 
promise  relief  from  such  inquisitorial  and  pestiferous  legis- 
lation in  matters  of  trade  and  commerce,  we  may  believe 
that  we  have  one  cause  for  their  general  favor  with  capi- 
talists. Trusts  seem,  therefore,  in  some  sort  to  be  defen- 
sive contrivances. 

But  the  prime  cause  for  the  formation  of  trusts  is  the 
decline  in  the  commercial  profit.  Merchants,  manufactur- 
ers, importers  and  traders  and  common  carriers  by  sea  and 
land  are  more  and  more  confronted,  in  virtue  of  the  con- 
ditions under  which  business  is  done  in  this  country,  with 
the  problem  of  the  vanishing  profit.  During  the  past  five 
and  twenty  years  selling  prices  and  in  consequence  the 
margin  of  profit  in  almost  every  sort  of  business  has  been 
reduced  from  16  2-3  to  50  per  cent,  and  it  has  become  in 


10 


\ 

many  lines  of  human  activity  a real  problem  whether  or 
not  business  can  hereafter  be  transacted  at  all  under  exist- 
ing conditions  at  a profit.  Every  considerable  merchant 
knows  that  for  many  years  past  in  many  lines  of  business 
in  the  United  States  concert  of  action  has  been  absolutely 
necessary  in  order  to  make  the  business  possible.  As 
prices  decline  and  profits  diminish  the  commercial  com- 
munity casts  about  for  such  means  of  relief  as  will  enable 
business  to  be  conducted  at  once  safely  and  at  a living 
profit  at  the  going  prices. 

The  slightest  reflection  enables  the  most  unthinking 
man  among  us  to  understand  that  when  two  men  employ 
themselves  in  doing  what  one  man  can  do  alone,  there  is 
a waste  of  energy,  for  which,  unless  it  vanish  in  the  air, 
at  last  the  consumer  of  the  product  of  those  laborers,  or 
somebody  else,  must,  in  some  way  or  another,  pay.  If  this 
supererogatory  service,  or  any  part  of  it,  be  paid  for  in 
money  or  money’s  worth,  then  the  waste,  quoad  hoc , is 
charged  to  the  consumer.  But  if  the  service  be  wholly 
or  partially  lost,  then  it  comes,  to  the  extent  of  the  loss, 
out  of  the  wear  and  tear  and  nerve  force  of  the  laborer 
who  performed  it,  or  else  it  is  distributed  around  along 
the  entire  class.  In  any  event  there  is  a waste  for  which 
somebody  must  pay  in  full,  and  whereby  the  public  is  by 
just  so  much  the  poorer.  If  it  be  true  that  the  trust  idea 
tends  substantially  to  check  this  waste  of  competition,  that 
would  seem  to  be  a point  in  its  favor.  It  may  well  be 
doubted — of  course  it  is  doubted — that  unrestrained  com- 
petition is  a public  benefit.  “I  do  not  think,”  said  Judge 
Gray  of  the  Court  of  Appeals  of  New  York,  in  a recent 
decision  ( Leslie  v.  Lorillard , no  N.  Y.  519,  534),  “that 
competition  is  invariably  a public  benefaction ; for  it  may 
be  carried  on  to  such  a degree  as  to  become  a general  evil.” 
To  this  dictum  many  wise  men  will  instantly  assent.  It  is 
not  hard  to  see  that  the  unification  of  an  industry  may  give 


rise  to  such  economies  in  the  conduct  of  the  business  as 
will  constitute  a considerable  profit  without  any  increase 
in  the  selling  price  of  the  commodity,  and  so,  as  soon  as 
the  trust  idea  was  conceived,  almost  every  business  capable 
of  taking  advantage  of  it  made  haste  to  do  so. 

Something  may  not  unfairly  be  said  about  the  influence 
of  the  labor  organizations  in  the  same  direction.  If  labor 
be  organized — as  very  properly  it  may  be — in  its  own  in- 
terest and  against  capital,  it  is  not  unnatural  that  capital 
should  be  organized  against  labor,  and  there  we  find  an- 
other reason  for  the  formation  of  trusts.  A potent  factor 
undoubtedly  in  inducing  these  combinations  at  the  outset 
was  the  similar  combinations  or  trusts  of  laboring  men, 
and  the  concerted  attempt  on  the  part  of  labor  to  dictate, 
for  itself  and  in  its  own  interest,  in  respect  to  many  details 
of  the  business.  The  employer  finds  himself  sometimes 
between  the  devil  and  the  deep  sea,  between  all  sorts  of  em- 
barrassments incident  to  competition  with  insolvent  rivals 
and  a bear  market  on  the  one  hand  and  the  labor  organiza- 
tions on  the  other.  He  thinks  he  is  obliged  to  pay  too 
much  for  his  labor  and  obliged  to  take  too  little  for  his 
product.  It  may  also  possibly  be  true  that  the  attitude  of  a 
certain  sort  of  politicians  and  the  truckling  tone  of  a certain 
portion  of  the  press  have  contributed  something  towards 
organizing  capital,  and  forcing  capitalists  to  protect  them- 
selves on  their  part  as  laboring  men  are  doing  upon  theirs. 

Trusts,  moreover,  are  one  of  the  penalties  of  a surplus; 
they  are  the  plague  of  our  prosperity;  one  of  the  results  of 
our  over-production  and  of  our  abundant  wealth.  When 
we  were  poor  we  were  not  perplexed  in  this  way ; beggars 
do  not  form  trusts ; but  now  we  seem  to  have  passed  the 
stage  where  competition  is  a universal  good,  and  find  our- 
selves in  a condition  of  trade  and  commerce  where  in  many 
lines  a monopoly  is  both  a necessity  and  an  advantage. 
The  Associated  Press  is  a familiar  instance  of  a real  mo- 


12 


nopoly  but  an  unquestioned  public  convenience  and  bene- 
fit, which  few  reasonable  human  beings  in  this  country 
would  willingly  be  without.  So,  also,  of  the  telegraph 
companies,  the  traction  companies,  the  gas  and  water 
companies,  and  the  various  governmental  monopolies,  like 
the  post  office  and  the  money  order  service. 

However  much  any  of  us  may  deplore  the  presence  and 
growth  of  these  great  combinations  of  capital,  and  how- 
ever much  it  may  be  apprehended  in  any  quarter  that  they 
may  work  a public  injury,  we  must  face  the  fact  that  they 
are  inevitable.  They  are  one  of  the  by-products  of  universal 
peace.  Intelligent  men  throughout  the  world  are  for  the 
most  part  now  busy  in  creating  great  commercial  unions 
for  the  conservation  and  increase  of  material  wealth,  in- 
stead of  equipping  armies  and  building  navies  to  destroy  it. 
These  combinations,  too,  are  upon  us  in  a flood  like  the 
tides;  a manifestation  in  business  of  the  same  tendency 
of  things  in  this  generation  which  has  elsewhere  and  other- 
wise shown  itself  in  many  directions,  as,  for  example,  in 
the  creation  of  the  German  state  out  of  a score  of  half 
feudal  principalities ; in  the  union  and  consolidation  of  our 
connecting  railways  into  trunk  lines;  in  the  postal  union; 
in  the  agitation  for  imperialism  in  our  already  overgrown 
republic;  and  in  the  fight  for  an  international  copyright. 
It  is  the  same  evolution,  the  same  centripetal  force  that  a 
century  ago  gave  us  cur  federal  union  of  states,  against 
the  gravitating  power  of  which,  forty  years  ago,  the  great 
armies  of  the  Confederacy  marched  to  defeat.  It  is  a trend 
or  tendency  in  business  in  these  last  days  against  the  gath- 
ering and  growing  momentum  of  which  frontier  legislation 
and  the  small  arts  of  the  politician  of  the  baser  sort  are 
as  certain  to  be  futile  as  an  act  of  Parliament  to  stay  the 
precession  of  the  equinoxes. 

These  combinations  seem  not  only  to  be  inevitable  under 
present  conditions  in  this  country,  but  under  modern  con- 


i3 


ditions  they  seem  to  have  in  them  as  little  of  the  element 
of  mischief  as  possible ; so  that  they  may  be  said  to  be  as 
nearly  harmless  from  an  economic  point  of  view  as  any 
great  engines  of  any  sort  set  in  motion  in  any  direction 
are  likely  to  be.  It  is  not  a fair  argument  against  anything 
merely  to  say  that  it  is  strong,  and  that  power  may  be 
abused.  That  is  a truism,  and  does  not  go  to  the  root  of 
the  matter.  We  must  either,  as  it  appears,  destroy  our 
prosperity  or  now  take  it  in  this  form.  No  one  who  thinks 
at  all  can  seriously  think  that  in  this  country  of  abounding 
resources,  limitless  capital  and  boundless  energy,  intelli- 
gence and  enterprise,  any  sort  of  business  can  be  made 
unduly  profitable  by  any  set  of  men  or  by  any  sort  of  a 
trust,  by  an  iniquitous  increase  in  the  selling  price  of  the 
commodity  produced,  without  provoking  competition  and 
calling  other  people  into  the  same  field  of  enterprise.  This 
is  so  much  in  the  nature  of  things  and  along  lines  of  com- 
mon experience  that  I need  not  argue  it.  For  the  same 
reason  that  famines,  once  a frequent  occurrence,  are  now 
in  any  civilized  country  as  nearly  impossible  as  anything 
can  well  be — because,  where  there  is  a temporary  de- 
ficiency in  any  of  the  necessities  of  life  the  overflow  from 
other  lands  rushes  in  and  supplies  the  want,  and  under 
modern  conditions  of  communication  and  transportation 
such  speedy  interchange  is  possible,  within  a few  days 
or  hours,  that  there  can  never  long  be  any  serious  lack  in 
any  quarter  of  anything  necessary  to  preserve  human  life 
— for  that  same  reason,  I say,  trusts,  except  possibly  as 
they  may  be  bolstered  up  by  a protective  tariff,  can  never 
long  corner  any  modern  market  in  such  a way  as  to  make 
seriously  against  the  public  interest.  These  industrial 
combinations  live  and  survive  only  as  they  serve  the  public 
as  well  as  or  better  than  their  competitors.  Their  se'.fish 
interest  and  the  public  good  thus  lie  along  the  same  lines. 

Nothing  is  so  certain  as  that  the  profit  in  any  line  of  busi- 


14 


ness  can  never  be  raised,  by  increase  of  price  to  the  con- 
sumer, beyond  a normal  amount,  for  any  length  of  time, 
without  tempting  the  cupidity  of  men  in  other  lines  and 
creating  at  once  an  outside  competition.  Thus  no  com- 
bination of  manufacturers,  not  protected  by  government 
patents,  by  a tariff  or  by  an  inequitable  arrangement  with 
the  railways,  can,  by  never  so  strong  a pact  between  them- 
selves, prevent  any  other  set  of  men  from  going  into  their 
business  whenever  the  general  conditions  of  the  trade 
promise  more  than  an  average  profit.  No  truth  is  any 
truer  than  this,  and  it  makes  an  end  of  the  objection  that 
trusts  in  these  United  States  and  in  this  day  are  or  can 
ever  be  “monopolies”  in  any  mischievous  way.  People 
who  are  opposing  trusts  merely  upon  the  score  of  monop- 
oly may  profitably  consider  this  proposition  seriously,  and 
try  their  hand  a little  at  its  defenses.  Whenever,  if  ever, 
profit  grows  excessive  by  reason  of  an  increase  of  selling 
price,  or  a greater  demand,  outside  capital  will  come  in  or 
the  trust  will  disintegrate. 

He  is  a somewhat  credulous  man,  therefore,  who  can 
keep  his  countenance  and  insist  upon  this  line  of  argu- 
ment in  opposition  to  trusts,  because  it  is  precisely  at  this 
point  that  the  public  safety  is  assured.  The  trust,  even 
though  it  secure  what  no  trust  has  ever  secured — a com- 
plete unification  of  a given  business — contains  within  itself 
the  elements  of  dissolution  the  moment  it  ceases  to  serve 
the  public  by  furnishing  its  product  at  a price  as  low  or 
somewhat  below  that  at  which  outside  capital  can  profita- 
bly compete.  Every  one  of  the  existing  trusts  has  the 
competition  of  outside  dealers,  and  it  has  also  the  menace 
of  other  and  new  competition  unless  the  selling  price  of 
its  product  be  kept  so  low  as  to  deter  outsiders  from  em- 
barking in  its  business.  It  not  only  must  meet  the  compe- 
tition that  is,  but  must  also  forestall  the  competition  that 
may  be.  Ex-Speaker  Reed,  in  the  North  American  Re- 


15 

view  for  December  last — just  before  his  untimely  death, 
well  said : 

“The  fact  is  that  every  business  man  now  knows 
that  the  only  monopoly  anybody  can  get,  except  the 
temporary  one  of  patents,  to  which  no  one  objects, 
is  by  producing  some  article  cheaper  and  selling  it 
cheaper  than  any  other  maker.  Whether  such  a 
monopoly  is  obnoxious  and  to  be  stamped  out  I 
leave  to  the  wise  determination  of  the  friends  of  the 
peopled 

While  the  outside  public  is  complaining  that  the  trust  is 
its  undoing,  because  it  is  a monopoly  and  because  it  sells 
its  product  too  high,  the  competitors  of  the  trust  are 
screaming  out  that  the  trust  sells  its  commodity  so  low 
that  it  is  impossible  to  carry  on  competing  enterprises. 
And  there  you  are.  This  is  well  illustrated,  for  example, 
by  the  complaint  that  is  made  of  the  Standard  Oil  Com- 
pany on  the  one  hand  by  the  general  public,  and  on  the 
other  hand  by  other  and  independent  oil  refiners;  and 
it  suggests  how  little  there  really  is  in  the  complaints  from 
either  source.  If  these  complaints  mean  anything,  they 
mean  that  the  public  is  well  served,  which  makes  an  end  of 
the  general  criticism. 

We  have,  therefore,  this  paradox:  The  same  selfish 
motive  that  prompts  the  individual  dealer  to  charge  the 
highest  price  moves  the  trust  to  charge  the  lowest.  The 
individual  charges  all  his  customers  will  pay,  the  trust 
charges  all  it  can — without  provoking  competition.  In 
each  case  all  that  the  traffic,  regarded  from  the  selfish 
standpoint  of  the  seller,  will  bear  is  charged.  The  same 
self-interest  which  makes  the  price  charged  by  the  indi- 
vidual as  high  as  possible  makes  that  charged  by  the  trust 
as  low  as  possible,  the  same  selfishness  working  in  the  two 
cases  this  opposite  result.  The  trust  fears  competition 
more  than  the  individual  operator  does,  because  the  elimi- 
nation of  competition  is  its  raison  d'etre.  The  trust  en- 


i6 

larges  the  margin  of  profit  at  the  bottom  by  cheapening 
production,  rather  than  at  the  top  by  increasing  selling 
prices.  It  cannot,  with  safety  to  itself,  raise  the  price  to 
the  consumer  to  a point  where  other  capital  will  be  tempt- 
ed to  embark  in  its  business ; that  is,  to  a point  beyond  the 
normal  profit;  but  it  can  by  new  economies  in  manufac- 
ture cheapen  without  limit  the  first  cost  of  its  production, 
and  thus  enlarge  its  gains  within  the  four  walls  of  its  own 
factory  without  openly  inviting  competition.  Here,  there- 
fore, the  self-interest  of  the  trust  works  benefit  to  the  pub- 
lic. It  keeps  present  selling  prices  low;  as,  for  example, 
the  selling  price  of  petroleum  and  sugar,  and  it  stimulates 
economies  in  production,  which  must  eventually  inure  to 
the  benefit  of  the  public.  Trust  economies  tend  ever  to  be- 
come public  economies.  When  the  trust  has  once  cheap- 
ened the  production  of  a thing,  somehow  in  a free  country 
the  business  gets  away  from  it,  and  the  public  in  the  end 
reaps  what  it  has  not  sown.  Schemes  for  realizing  inordi- 
nate profits  for  the  trusts  or  for  any  one  else  will  not  for- 
ever stay  put. 

A very  striking  illustration  of  the  truth  of  this  proposi- 
tion is  found  in  what  about  ten  years  ago  attracted  wide- 
spread attention  as  the  “Reading  Railroad  anthracite  coal 
combination,”  which,  when  formed,  seemed  to  many  minds 
to  be  a very  vicious  sort  of  trust.  The  facts  in  point  are 
briefly  these:  At  that  time  the  anthracite  coal  carrying 
companies  were  charging  an  open  rate  of  one  dollar  and 
eighty  cents  per  ton  on  coal  from  the  mines  in  Pennsyl- 
vania to  tide-water  at  and  about  New  York,  with  a con- 
tract rate  to  the  independent  producers  of  fifty  per  cent 
of  the  tide-water  prices.  Mr.  McLeod,  the  then  president 
of  the  Reading  Railroad  and  the  soul  of  the  combination, 
in  order  to  “corral”  the  business  of  competing  railroads 
for  the  combination,  offered  a contract  rate  to  the  inde- 
pendent producers  of  forty  per  cent  of  the  price  at  tide- 


i7 


water;  this  was  a reduction  of  twenty  per  cent  in  tolls  (the 
average  contract  rate  having  theretofore  been  something 
less  than  two  dollars)  which  amounted  to  about  forty  cents 
per  ton,  and  it  was  a reduction  which  the  combination 
could  well  afford  to  make,  if  the  Reading  Railroad  and  its 
allies  could  carry  out  their  plan  and  thereby  substantially 
control  the  anthracite  coal  business  of  the  country.  The 
Pennsylvania  Railroad,  which  was  not  in  the  combination, 
met  this  cut  by  making  an  open  rate  of  one  dollar  and 
forty-four  cents,  and  announcing  that  for  the  future  its 
tolls  would  likewise  be  laid  upon  the  basis  of  forty  per  cent 
of  the  tide-water  prices.  So  things  ran  on.  In  the  full- 
ness of  time,  as  we  know,  Mr.  McLeod’s  bubble  burst ; the 
Reading  coal  trust  fell  to  pieces,  and  the  several  anthra- 
cite carriers  again  began  to  act  as  independently  as  ever. 
But — mark  it  well — the  old  conditions  as  to  tolls  could  not 
be  quite  restored;  the  fifty  per  cent  contract  rate  had  re- 
ceived a blow  at  the  hands  of  the  trust  from  which  it  could 
not  recover.  So  that,  upon  the  collapse  of  the  combina- 
tion, the  anthracite  carriers  by  agreement  fixed  upon  one 
dollar  and  forty-five  cents  as  the  open  rate  to  tide-water, 
and  forty  per  cent  of  tide-water  prices  as  the  contract  rate, 
thus  making  the  reduced  trust  tolls  the  basis  of  their  rates. 
This  thirty-five  or  forty  cents  per  ton,  lost  to  the  carrier 
and  saved  for  somebody,  was  the  direct  result  of  the  reduc- 
tion in  tolls  made  by  Mr.  McLeod,  and  is  to  be  credited  di- 
rectly to  the  trust.  This  reduction,  upon  the  assumption 
that  about  one-third  of  the  total  production  of  the  Pennsyl- 
vania anthracite  coal  fields  goes  to  market  at  tide-water, 
thus  takes  from  the  railways  as  common  carriers  not  far 
from  six  millions  of  dollars  per  annum,  and  divides  it  be- 
tween the  producers  and  the  consumers  of  anthracite  coal. 
As  between  the  producer  and  consumer,  any  merchant  will 
bear  me  out  in  the  statement  that  the  consumer  will  in 
the  end  get  more  than  half  of  this  saving;  so  that  this 


i8 

Reading  trust,  instead  of  working  a public  mischief,  either 
in  its  life  or  in  its  death,  was  the  efficient  cause  of  saving 
some  three  or  four  millions  of  dollars  annually  to  the  con- 
sumers of  anthracite  coal — that  is  to  say,  to  the  public — 
on  the  Atlantic  sea-board.  And  that  saving  was  not  for 
that  year  only,  but  for  all  years,  because  railway  people 
know  only  too  well  that  the  hands  on  the  dial  seldom  go 
backward,  and  that  freight  rates  tend  ever  downward. 
This  is  only  one  of  many  instances  which  might  be  ad- 
duced, and  it  well  illustrates  the  truth  of  my  proposition 
that  trust  economies  somehow  inevitably  and  ultimately 
inure  to  the  benefit  of  the  public. 

Every  trust  in  these  times  of  diversified  production  and 
wanton  plenty  must  face  the  fact  that  its  product,  what- 
ever it  may  be,  is  not  an  indispensable  commodity.  The 
public  can  get  on  without  it  unless  it  comes  at  a reason- 
able price,  and  they  will  get  on  without  it  more  and  more 
in  proportion  as  it  is  expensive.  If  we  can’t  have  one  kind 
of  breakfast-food  cheap  we  can  have  another.  It  is  in  this 
view  of  the  matter  that  the  whole  seventy  or  eighty  mil- 
lions of  the  consuming  public  are  pitted  against  any  trust 
which  unduly  raises  its  prices;  thus  every  trust  has  for 
its  competitors,  first,  outside  dealers  in  its  own  or  some 
similar  product;  second,  rivals  who  will  come  in  if  the 
business  is  made  too  profitable;  third,  the  three-quarters 
of  a hundred  millions  of  free  Americans  who  will  not  use 
its  product,  whatever  it  may  be,  except  at  a reasonable 
price.  This  effectually  draws  the  fangs  of  the  most  rapa- 
cious trust. 

We  are  confronted,  when  considering  the  matter  of  com- 
mercial profits  in  connection  with  these  combinations,  with 
such  questions  as  these:  Have  men  a moral  right  to  do 
business  at  a profit?  Is  the  public  morally  entitled  to  the 
benefits  of  such  economies  in  the  production  by  private 
enterprise  of  a given  article  as  accrue  from  the  accumula- 


19 

tion  of  capital  and  the  concentration  of  interest  in  its 
manufacture?  Are  the  promoters  of  a trust  entitled  to 
such  profits  as  they  can  secure  by  reason  of  the  economies 
incident  to  the  trust?  Is  it  morally  wrong,  by  concerted 
action  among  manufacturers,  to  prevent  the  production  of 
more  sugar,  or  oil,  or  strawboard,  or  what  not,  than  can  be 
sold  at  a profit?  Have  the  public  a right  to  insist  upon 
over-production,  so  that  manufactured  products  must  be 
sold  at  a loss?  Is  one  man  morally  entitled  to  the  advan- 
tage of  another  man’s  foresight  and  economy  in  the  con- 
duct of  his  private  business?  Is  not  a fair  price  for  a thing 
morally  better  than  a low  price  for  it?  Is  not  a certain 
price  for  a thing  economically  better  than  a fluctuating 
and  uncertain  price?  Do  the  politicians  really  believe  that 
competition  unchecked  and  over-production  unrestrained, 
with  the  low  prices,  the  inadequate  and  intermittent  wages, 
the  glut  of  markets,  and  the  sacrifice  of  energy  incident 
thereto,  will  better  the  condition  of  that  class  whose  rights 
they  especially  champion?  Is  anybody  so  credulous  as 
to  believe  that  trusts  of  capital  can  be  legislated  or  liti- 
gated out  of  existence,  while  trusts  of  labor  continue? 
None  of  these  questions  need  be  answered,  but  some  of 
them  seem  to  answer  themselves. 

It  will  not  now  be  pretended  that  it  has  been  the  ten- 
dency of  any  of  the  successful  trusts  to  raise  unduly  the 
price  of  their  products.  On  the  contrary,  trust  prices  have 
in  general  declined.  Thus,  for  example,  when  petroleum 
was  first  used  as  an  illuminating  oil,  it  sold  for  a dollar  a 
gallon.  Now  a much  higher  grade  of  refined  oil  is  sold  for 
less  than  ten  cents  a gallon,  and  the  Standard  Oil  people 
handle  it  at  times  at  a profit  of  one-eighth  of  a cent  a gal- 
lon— a margin  that  would  ruin  any  small  concern.  The 
same  thing  is  true  in  general  of  other  manufacturing  com- 
binations, as  well  as  of  the  telegraph  monopoly  and  of  the 
rates  of  the  consolidated  trunk  lines  of  railway.  If  the 


20 


corner  groceryman  were  obliged  to  do  his  business  upon 
the  margin  of  profit  per  cent  earned  by  the  larger  trusts, 
he  would  be  speedily  bankrupt.  Nor  need  it  be  argued 
that  trusts,  like  other  commercial  enterprises,  are  entitled 
to  share  in  such  general  prosperity  as  has  come  to  all 
of  us,  in  trade  and  out  of  it,  in  the  good  times  with  which 
our  country  is  at  present  favored.  If  there  has  been  a 
general  rise  in  prices  all  along  the  line,  and  in  wages  for 
all  sorts  of  labor,  no  fair  man  will  complain  if  it  shall  trans- 
pire that  the  prices  of  trust  commodities  have  also  ad- 
vanced. They  are  certain  to  obey  the  general  laws  of 
trade,  and  to  rise  and  fall  with  the  economic  tides. 

Inasmuch  as,  according  to  the  returns  of  the  last  census, 
the  total  value  of  the  output  of  all  the  manufacturing  trusts 
in  the  country  was  only  about  twelve  per  cent  of  the  total 
output  of  all  our  manufacturing  concerns  for  the  census 
year — or  about  one-eighth  of  the  whole  amount  of  manu- 
factured goods — there  is  as  yet  no  very  serious  reason  for 
apprehension  that  the  trusts  are  at  once  to  absorb  all  our 
industries,  and  so  to  have  us,  as  the  phrase  popularly  is, 
at  their  mercy.  And  it  is  only  fair  to  suggest  here  that  if 
the  prices  of  trust-made  or  trust-handled  goods  in  this 
country  had  advanced  in  recent  years  in  the  proportion 
that  the  wages  for  unskilled  and  half-skilled  labor  have 
been  advanced,  there  would  be  the  very  strongest  grounds 
for  protest.  Nothing  is  so  well  paid  for  with  us  as  manual 
labor,  and  nothing  has  felt  the  stimulus  of  good  times  so 
much  as  the  labor  market.  No  greedy  trust  magnate  has 
been  able  to  force  up  the  price  of  what  he  has  to  sell  as 
much  as  the  laboring  man  has  been  able  to  increase  his  pay 
in  these  busy  and  prosperous  times. 

To  what  extent,  if  at  all,  trade  ought  to  be  interfered 
with,  or  competition  either  facilitated  or  prevented  by 
courts  and  statutes,  or  how  far  trade  may  lawfully  be  re- 
strained or  prevented  by  private  contract,  involves  at  bot- 


21 


tom  elementary  questions  of  public  policy.  We  are  to 
understand,  as  of  course,  that  the  word  “trade”  in  this  con- 
nection means  much  more  than  barter  and  sale,  or  even 
merchandising  in  the  broadest  acceptation  of  that  term; 
and  must  include,  when  we  consider  legislation  or  litiga- 
tion affecting  it,  not  only  the  dealing  of  merchants,  but 
the  business  of  railroading,  insurance  and  manufacture, 
and,  indeed,  not  attempting  now  to  speak  with  scientific 
accuracy,  the  greater  part  of  all  the  contractual  relations 
between  man  and  man  in  a civilized  community.  This  will 
include  statutes  regulating  the  practice  of  medicine,  and  of 
law ; statutes  of  patent  and  copyright ; usury  laws ; Sunday 
laws;  laws  regulating  the  sale  of  intoxicating  liquors  at 
retail ; laws  regulating  the  operation  of  mines ; laws  against 
champerty  and  maintenance;  taxation  of  commerce,  and 
particularly,  in  this  country,  of  interstate  commerce ; 
“drummers’  ” taxes;  laws  attempting  to  regulate  dealings 
in  futures,  forbidding  wager  policies  on  human  life,  pro- 
hibiting the  operation  of  lotteries,  and  all  that  large  body 
of  legislation  by  which  the  regulation  of  labor  is  attempted. 

When  one  begins  to  talk  or  think  about  “public  policy,” 
by  which  the  economic  soundness  of  all  legislation  of  this 
sort  is  to  be  measured,  he  is  confronted  at  the  outset  with 
the  fact  that  it  is  a very  vague  and  variable,  or,  as  mathe- 
maticians say,  a very  unassignable  quantity.  This  notion 
has  crystallized  itself  many  times  in  the  law  reports.  Thus, 
for  example,  it  has  been  said  by  a famous  English  judge 
that  “public  policy  does  not  admit  of  definition,  and  is  not 
easily  explained”  (Kekewich,  J.,  in  Davies  v.  Davies , L.  R. 
36  Ch.  Div.  359,  364),  and  by  the  Supreme  Court  of  the 
United  States  that  “the  application  of  the  rule  is  more 
difficult  than  a clear  understanding  of  it.”  (Bradley,  J.,  in 
Oregon  Steam  Navigation  Co.  v.  Wins  or,  20  Wall.  64.) 
Again,  it  was  a long  time  ago  well  said,  in  another  Eng- 
lish case,  that  public  policy  “is  a very  unruly  horse,  and 


22 


when  once  you  get  astride  it  you  never  know  where  it  will 
carry  you”  ( Richardson  v.  Mellish,  2 Bing.  229,  252),  and, 
quoting  once  more  from  a recent  English  case,  we  find  the 
court  saying: 

“One  thing  I take  to  be  clear,  and  it  is  this — that 
public  policy  is  a variable  quantity ; that  it  must  vary 
and  does  vary  with  the  habits,  capacities  and  oppor- 
tunities of  the  public.”  (Davies  v.  Davies,  supra.) 

Lord  Justice  Bowen,  also  to  the  same  effect,  said  not 
long  ago  in  the  High  Court  of  Chancery : 

“The  determination  of  what  is  contrary  to  the  so- 
called  policy  of  the  law  necessarily  varies  from  time 
to  time.  Many  transactions  are  upheld  now  by  our 
own  courts  which  a former  generation  would  have 
avoided  as  contrary  to  the  supposed  policy  of  the 
law.  The  rule  remains,  but  its  application  varies 
with  the  principles  which,  for  the  time  being,  guide 
public  opinion.”  (Evanturel  v.  Evanturel , L.  R.  6 
P.  C.  1,  29.  Approved  by  Bowen,  E.  J.,  in  Maxim- 
Nordenfelt  Guns  & Ammunition  Company  v.  Nor  den- 
felt  (1893),  3 Ch.  630,  665.) 

Nothing  is  more  certain  than  the  truth  of  these  state- 
ments, which  might  be  multiplied  indefinitely  from  the  law 
reports.  They  are  iterated  and  reiterated  by  the  judges 
every  day. 

“Public  policy  is  variable — the  very  reverse  of  that 
which  is  the  policy  of  the  public  at  one  time  may  be- 
come public  policy  at  another.”  ( Griswold  v.  III. 
Cent.  R.  Co.  (1894),  90  Iowa,  265.) 

“It  changes  with  the  changing  condition  of  the 
times.  It  is  hardly  to  be  expected  that  a people  who 
are  transported  by  steam  with  a rapidity  hardly  con- 
ceived of  a century  ago,  who  are  in  constant  and  in- 
stant communication  with  each  other  by  electricity, 
and  who  carry  on  the  most  important  commer- 
cial transactions  by  the  use  of  the  telegraph,  while 
separated  by  thousands  of  miles,  will  entertain  pre- 
cisely the  same  views  of  what  is  conducive  to  the 
public  welfare,  in  commercial  and  business  trans- 


23 


actions,  as  the  people  of  the  last  century,  who 
lived  when  commerce  crept  slowly  along  the  coasts, 
shut  out  of  the  interior  by  the  absence  of  roads  and 
hampered  by  an  almost  impassable  ocean.,,  (San- 
born, J.,  in  United  States  v.  Trans-Missouri  Freight 
Ass’n,  58  Fed.  Rep.  58,  68.) 

Public  policy  differs  also  in  different  states  and  coun- 
tries, as  well  as  in  the  same  country  at  different  times. 
As  people  differ  in  their  beliefs,  opinions,  aims,  habits  and 
surroundings,  it  is  natural  and  inevitable  that  they  should 
entertain  different  views  as  to  what  will  best  promote  the 
public  welfare.  We  need  not  stop  to  illustrate  this  simple 
and  obvious  rule. 

From  the  fact  that  public  policy  is  thus  variable,  it  fol- 
lows that  no  fixed  rule  can  be  laid  down  as  to  what  is  or 
is  not  contrary  to  public  policy.  We  look  to  the  law  re- 
ports to  find  what,  from  time  to  time,  has  been  adjudged 
upon  the  subject,  and  here  we  see  in  clearest  perspective 
the  variance  to  which  we  have  just  referred.  Upon  the 
most  casual  examination  of  the  law  books  we  instantly 
discover  that  cases  declaring  a rule  of  public  policy  in  one 
year  of  grace  are  of  very  little  or  no  value  as  authority  in 
ascertaining  what  is  the  true  rule  on  the  particular  subject 
in  another  and  later  year.  For  example,  how  would  it  do 
to  cite  the  decision  in  the  Dred  Scott  case,  which  was  ab- 
solutely sound  law  at  the  time  it  was  rendered,  in  one  of 
the  cases  arising  in  the  year  1903  between  a railway  com- 
pany and  its  employes?  We  see  that  it  is  for  the  most  part 
idle  in  discussions  of  this  subject  to-day  to  cite  as  author- 
ity, or  even  by  way  of  argument,  the  decisions  of  the  courts 
of  half  a century  ago,  or  of  even  fifteen  or  a dozen  years 
ago.  What  was  absolutely  right  then  may  be  absolutely 
wrong  now. 

This  notion  is  well  expressed  by  Lord  Watson  in  a recent 
case  in  the  House  of  Lords: 


24 


“A  series  of  decisions  based  upon  grounds  of  pub- 
lic policy,  however  eminent  the  judges  by  whom 
they  were  delivered,  cannot  possess  the  same  bind- 
ing authority  as  decisions  which  deal  with  and 
formulate  principles  which  are  purely  legal.  The 
course  of  policy  pursued  by  any  country  in  relation 
to  and  for  promoting  the  interests  of  its  commerce 
must,  as  time  advances  and  its  commerce  thrives, 
undergo  change  and  development  from  various 
causes  which  are  altogether  independent  of  the  ac- 
tion of  its  courts.  In  England,  at  least,  it  is  be- 
yond the  jurisdiction  of  her  tribunals  to  mould  and 
stereotype  national  policy.  Their  function,  when  a 
case  like  the  present  is  brought  before  them,  is, 
in  my  opinion,  not  necessarily  to  accept  what  was 
held  to  be  the  rule  of  policy  a hundred  or  a hundred 
and  fifty  years  ago,  but  to  ascertain,  with  as  near 
an  approach  to  accuracy  as  circumstances  permit, 
what  is  the  rule  of  policy  for  the  then  present  time.” 
(Nor  den  felt  v.  Maxim-Nordenfelt  Guns  & Ammuni - 
tion  Co.  (1894),  App.  Cas.,  535,  553,  554.) 

Conceding,  or  better  realizing,  this  inherently  fluctuating 
character  or  quality  of  public  policy,  we  see  that  the  enact- 
ment of  statutes  to  declare  or  define  it  must  of  necessity  be 
a dangerous  business,  because  such  statutes,  however  ac- 
curately they  reflect  the  public  policy  of  the  moment  of 
their  enactment,  must  almost  immediately  begin  to  be  wrong. 
The  common  law,  reposing,  according  to  the  legal  fiction, 
in  the  bosom  of  the  court,  is  flexible,  and  can  change  or  be 
changed,  as  we  have  seen,  with  the  change  of  condition; 
but  a statute  stands  rigid  on  the  statute  book,  and  is  the 
same  thing  yesterday,  to-day  and  forever ; so  that  it  must 
be  amended  or  repealed,  or  modified,  or  disregarded  in  the 
progress  of  time,  as  conditions  change,  in  order  not  to  be 
quite  out  of  tune  and  touch  with  the  orderly  progression  of 
things. 

This  is  something  which  the  rural  legislator,  in  his  zeal 
to  pass  laws  upon  the  subject  of  trade,  seems  entirely  to 


have  overlooked.  Accordingly,  this  inexorable  fact  has 
been  the  undoing  of  much  of  his  work.  By  reference  to 
the  law  books,  he  is  informed  with  sweeping  generality 
that  at  common  law  monopolies  are  illegal  and  void.  If 
he  be  industrious  and  curious,  and  reads  Norman  French, 
he  finds  out  that,  as  early  as  the  reign  of  Henry  V.,  in  the 
year  1415,  a case  ( Dier’s  Case , Y.  B.  2 Henry  V.,  fol.  5,  p. 
26),  which  seems  to  have  been  the  first  of  the  sort,  arose, 
in  which  a dyer  had  bound  himself  not  to  exercise  his 
trade  for  half  a year  in  the  same  town  with  the  plaintiff. 
In  an  action  on  the  bond,  this  was  held  to  be  an  unlawful 
agreement,  as  in  restraint  of  trade.  This  case  was  decided 
long  before  there  was  any  statute  on  the  subject,  and  from 
it  has  come  down  to  us,  in  ordinary  generation,  a long 
line  of  decisions  upon  the  general  question  there  involved. 
At  a later  time  patents  or  grants  of  the  crown,  in  the  na- 
ture of  monopolies,  to  certain  persons  or  corporations, 
secured  to  them  the  exclusive  right  to  carry  on  some  busi- 
ness, trade  or  avocation. 

I need  not  recount  the  familiar  history  of  the  creation 
of  these  monopolies,  commencing  about  the  time  of  Henry 
VIII.,  or  a little  later.  By  the  forty-fourth  year  of  the 
reign  of  Queen  Elizabeth  these  grants  had  begun  to  attract 
the  attention  of  the  courts,  and  in  “The  case  of  Monopo- 
lies,” reported  by  Lord  Coke  (11  Coke,  84b),  they  were 
declared  to  be  illegal  at  common  law.  There  was  still  no 
statute  on  the  subject,  and  the  argument  ran  back  to  the 
old  case  of  the  dyer  in  the  reign  of  Henry  V.  {supra).  In 
the  case  of  “The  Monopolies,”  which  is  the  leading  case 
upon  the  subject,  it  appeared  that  one  Darcy  had  been 
granted  the  exclusive  right  to  buy  beyond  the  sea  all  such 
playing  cards  as  he  thought  good,  and  to  make  and  sell 
them  within  the  Kingdom,  that  he  and  his  agents  and 
deputies  should  have  the  whole  traffic  and  merchandise 


26 


in  playing  cards,  and  that  no  other  should  have  the  right 
of  making  playing  cards  within  the  realm. 

“All  trades,”  said  the  court,  “as  well  mechanical 
as  otherwise,  which  prevent  idleness  (the  bane  of  the 
commonwealth),  exercising  men  and  youth  in  labor 
for  the  maintenance  of  themselves  and  their  fami- 
lies, and  for  the  increase  of  their  substance,  to  serve 
the  Queen  when  occasion  shall  require,  are  profit- 
able for  the  commonwealth,  and,  therefore,  the 
grant  to  the  plaintiff  to  have  the  sole  making  of 
them  is  against  the  common  law,  and  the  benefit  and 
liberty  of  the  subject.” 

It  is  upon  such  a key  as  this  that  a vast  deal  of  discus- 
sion of  this  subject  has  proceeded  thence  to  the  present 
time.  Serious  men,  and  able  and  conscientious  lawyers, 
have  gravely  argued  in  the  United  States,  within  the  past 
few  years,  to  courts  of  justice,  in  cases  involving  ^he  legal- 
ity of  modern  commercial  trusts,  along  precisely  this  line, 
and  have  seemed  not  to  understand  that  the  case  of  “The 
Monopolies”  and  other  cases  of  the  same  sort,  are  no  more 
valuable  as  authority  or  available  in  argument  in  the  twen- 
tieth century,  upon  the  question  of  the  legality  of  our  com- 
mercial trusts,  than  if  cited  in  a contention  over  the  Mon- 
roe Doctrine. 

The  struggle  of  the  English  people  against  monopolies 
culminated  in  the  passage  of  the  statute  of  21  James  I., 
which  attempted  their  prohibition.  In  a legal  sense  mo- 
nopoly at  the  present  day  simply  means  the  obtaining, 
without  a grant  from  the  sovereign,  of  the  exclusive  power 
to  carry  on  a certain  trade  or  business.  In  a popular  sense, 
the  term  monopoly  is  applied  to  every  large  and  successful 
business  enterprise;  and  some  statutes,  as,  for  example, 
legislation  against  department  stores,  go  so  far  as  to  seem 
to  proceed  upon  the  notion  that,  because  an  enterprise  has 
attained  large  proportions,  it  is,  in  a legal  sense,  a monop- 
oly— ergo , unlawful.  Railways,  national  banks  and  corpo- 


27 

rations  of  all  kinds  are,  in  the  view  of  that  part  of  the  pub- 
lic in  sympathy  with  such  legislation  as  this,  obnoxious 
as  monopolies. 

Recurring  for  a moment  to  the  idea  that  considerations 
of  public  policy  are  at  the  bottom  of  all  sound  legislation 
affecting  combinations  in  restraint  of  trade,  and  that  public 
policy  is  a changeable  quantity  in  the  problem,  Lord  St 
Leonards,  in  a case  in  the  House  of  Lords,  decided  a little 
after  the  middle  of  the  last  century,  used  the  following 
notable  language: 

“My  Lords,  there  are  just  a few  remarks  that  I 
wish  to  make  upon  public  policy.  I will  not  add  a 
word  to  what  has  been  already  said  by  my  noble  and 
learned  friends,  but  I will  call  your  attention  to  what 
fell  from  one  of  the  learned  judges  (Mr.  Justice 
Cresswell)  as  regards  the  restraint  of  trade.  That 
learned  judge  says  that  with  regard  to  the  restraint 
of  trade,  there  is  a maxim  in  common  law,  and  he 
refers  to  a case  in  Year  Books  (2  Hen.  V.,  pi.  26), 
to  prove  it;  but  the  learned  judge  did  not  tell  your 
lordships  upon  what  that  maxim  was  founded.  No- 
body supposes  that  there  was  any  statute  upon  the 
subject  in  those  times.  Upon  what,  then,  was  that 
maxim  founded?  Why,  upon  public  policy  for  the 
good  of  the  realm.  It  was  not  good  for  the  realm 
that  men  should  be  prevented  from  exercising  their 
trades.  Now,  let  us  see  what  this  particular  case  is; 
it  lies  in  few  words  and  remarkable  consequences 
have  resulted  from  it.  It  was  an  obligation  with 
a condition  that  if  a man  did  not  exercise  his  craft 
of  a dyer,  within  a certain  town,  that  is,  where  he 
carried  on  his  business,  for  six  months,  then  the 
obligation  was  to  be  void,  and  it  was  averred  that 
he  had  used  his  art  there  within  the  time  limited, 
upon  which  Mr.  Justice  Hull,  being  uncommonly 
angry  at  such  a violation  of  all  law,  said,  according 
to  the  book,  Ter  Dieu,  if  he  were  here,  to  prison 
he  should  go  until  he  made  fine  to  the  king,  because 
he  had  dared  to  restrain  the  liberty  of  the  subject/ 


28 


I wish  to  draw  your  lordships’  attention  to  this  case. 
Angry  as  the  learned  judge  was  at  that  infraction 
of  the  law,  what  has  been  the  result  of  that  very 
rule  without  any  statute  intervening?  That  the 
common  law,  as  it  is  called,  has  adapted  itself,  upon 
grounds  of  public  policy,  to  a totally  different  and 
limited  rule  that  would  guide  us  at  this  day,  and  the 
condition  which  was  then  so  strongly  denounced  is 
just  as  good  a condition  now  as  any  that  was  ever 
inserted  in  a contract,  because  a partial  restraint, 
created  in  that  way,  with  a particular  object,  is  now 
perfectly  legal.  Without  any  exclamation  of  the 
judge,  and  without  any  danger  of  prison,  any  sub- 
ject of  this  realm  may  sue  upon  such  a condition  as 
Mr.  Justice  Hull  was  so  very  indignant  at  in  that 
particular  case.  That  shows,  therefore,  that  the 
rule  which  the  learned  judge,  whose  opinion  is  now 
before  the  House,  thought  depended  upon  some 
rule  of  common  law,  regardless  of  policy,  was  found- 
ed upon  public  policy,  and  has  been  restrained  and 
limited  and  qualified  up  to  this  very  hour,  and  bene- 
ficially so,  by  that  very  policy  which  it  is  supposed 
had  no  bearing  at  all  upon  the  foundation  of  the 
rule.”  ( Egerton  v.  Earl  Brownlow,  4 H.  L.  Cas.,  1,  237, 

238.) 

All  legislation  affecting  monopolies,  or  combinations  in 
restraint  of  trade,  is  meant  to  be,  or  pretended  or  intended 
to  be,  generally  declaratory  of  the  common  law.  This  is 
especially  true  of  the  recent  legislation  upon  that  behalf 
in  the  United  States.  It  has  not,  as  far  as  I know,  been 
attempted  by  any  of  these  statutes  from  the  first  one,  in 
the  reign  of  James  I.,  to  the  last  one  in  the  reign  of  Theo- 
dore Roosevelt,  to  make  anything  unlawful  which  was  not 
assumed  or  supposed  to  be  so  at  common  law.  The  stat- 
ute of  James  I.  declared  the  law  as  it  was  understood  then 
to  be — as,  for  an  example,  it  had  been  decided  to  be  in 
the  case  of  “The  Monopolies,”  and  all  the  later  statutes 
have  ostensibly  done  the  same  thing. 


29 


In  this  country  prior  to  about  the  year  1889,  the  subject 
of  monopolies,  or  contracts  in  restraint  of  trade,  had  not 
attracted  the  particular  attention  of  our  legislatures.  Oc- 
casional decisions  of  the  courts  had  assumed  to  prescribe 
common  law  rules,  but  no  statute,  state  or  federal,  of  any 
radical  or  strenuous  character,  had  been  enacted.  During 
the  two  or  three  years  prior  to  1889,  however,  the  atten- 
tion of  the  public  was  called  to  the  subject  by  the  discov- 
ery that  a large  number  of  commercial  trusts  were  in 
existence  in  the  United  States,  which  were  or  which  were 
assumed  or  supposed  to  be,  monopolizing,  or  tending  to 
monopolize,  various  lines  of  business.  This  was  assumed 
to  be  in  violation  of  the  rights  of  the  public,  and  statutes 
were  at  once  proposed  to  remedy  what  it  was  taken  for 
granted  was  a growing  evil.  Men  looked  into  the  law  and 
found  in  the  old  English  statutes,  and  especially  in  the 
earlier  reports,  much  crude  denunciation  of  “monopoly,” 
and  much  generalization  upon  the  blessings  and  benefits 
of  competition  in  trade.  This,  upon  a superficial  view, 
seemed  to  fit  the  case,  and  statutes  were  hastily  drafted, 
and  more  hastily  crowded  through  the  legislatures  of 
twenty  or  more  states,  under  all  sorts  of  partisan  pressure, 
with  the  practical  result,  speaking  generally,  of  declaring, 
in  the  United  States,  at  the  end  of  the  nineteenth  century, 
the  common  law  of  England  of  the  fifteenth,  sixteenth  and 
seventeenth  centuries. 

These  statutes,  taking  a general  view  of  their  intend- 
ment, declare  the  law  as  the  English  judges  of  more  than 
an  hundred  years  ago  expounded  it,  with  little  or  no  re- 
gard to  the  changed  conditions  of  business  since  that  time. 
They  write  the  dogmas  of  the  pre-Revolutionary  period 
into  our  statute  law  of  to-day.  This  was  not,  perhaps,  an 
altogether  unnatural  result  of  the  widespread  interest  and 
attention  that  “trusts”  created  in  the  subject.  Every  one 
of  these  statutes — including  the  federal  act  of  July  2,  1890. 


30 

known  as  the  Sherman  Law,  to  which  a further  reference 
will  hereafter  be  made — is  open  fairly  and  honestly  to  the 
same  criticism,  viz.,  that  they  seek  to  crystallize  into  stat- 
utes doctrines  of  public  policy  which  are  obsolete  or  obso- 
lescent, if  not  wholly  outgrown  and  outworn.  Nothing, 
as  was  suggested  above,  is  easier  than  to  generalize  in  a 
sweeping  fashion  about  the  evils  of  monopoly  and  the 
blessings  of  competition.  A legislator  can  do  a very  large 
business  in  that  line  on  a very  small  capital,  and  there  is 
some  excuse,  we  must  admit,  for  the  activity  which,  espe- 
cially in  hard  times,  has  been  displayed  in  that  business. 

Englishmen  have  always  had  what  they  have  hugged  to 
their  hearts  as  a wholesome  dread  of  monopoly.  No  Eng- 
lishman ever  knew — and  no  one  of  us  can  ever  know — ex- 
actly what  “monopoly”  in  this  precious  phrase  means ; but 
that  it  means  something  perfectly  awful  and  to  be  shunned 
like  the  plague,  no  really  sound  Englishman  ever  doubted. 
It  is  a sort  of  bogey  that  has  served  to  scare  an  hundred 
generations  of  them.  So  also,  as  of  course,  very  much  of 
the  recent  agitation  which  has  arisen  over  monopoly,  and 
which  has  provoked  for  the  past  dozen  years  a flood  of 
legislation  and  litigation  in  the  United  States  upon  the 
subject,  is  the  outcropping  of  the  old  grudge  which  the 
“have-nots”  always  have  against  the  “haves.”  It  gave 
the  politicians  a chance,  of  which  they  were  not  slow  to 
avail  themselves,  and  of  which  they  have  made  the  most. 

It  is  a significant  fact  that  during  the  same  period  of 
time  when  our  legislatures,  including  the  federal  congress, 
have  been  going  off  upon  a quasi-mediaeval  tangent,  the 
courts  have  for  the  most  part  been  unswerved,  and  have  in 
no  notable  instance  been  carried  off  their  feet  by  the  popu- 
lar clamor.  A great  number  of  suits  have  been  brought, 
in  which  it  has  been  sought  to  commit  the  courts  to  the 
same  radical  views  upon  the  subject  which  have  been  en- 
acted into  statutes,  and  in  which  it  has  been  sought  to 


31 

secure  adjudications  upon  the  economic  questions  in- 
volved— for  the  most  part,  as  I shall  attempt  hereafter  to 
show,  without  success.  And  it  is,  I repeat,  creditable  to 
the  courts  that  this  is  so.  The  decisions  of  the  courts  of 
last  resort  have,  as  a rule,  in  spite  of  the  popular  clamor, 
come  down,  year  by  year,  in  an  orderly  and  consistent 
stream  of  precedent,  substantially  uninfluenced  by  the 
accidental  excitement  upon  the  questions  of  combination, 
competition  and  monopoly,  which  has  more  or  less  dis- 
ordered the  thinking  of  the  soberest  of  us  for  the  past 
dozen  years. 

The  courts,  in  the  greater  number  of  cases,  have  accord- 
ingly reflected  somewhat  more  accurately  than  the  stat- 
utes, the  public  policy  of  the  times.  No  doubt  the  de- 
cision in  the  case  of  “The  Monopolies”  formulated  the 
views  upon  the  subject  at  that  time.  But,  thence  to  the 
present,  there  has  been  a constant  relaxation  of  the  rule  as 
far  as  it  affects  trade  and  commerce.  A long  line  of  de- 
cisions, both  here  and  in  England,  illustrate  this ; and  for 
the  reason  just  indicated  it  is  to  the  decisions  that  we  are 
chiefly  to  look,  rather  than  to  the  statutes,  for  the  more 
correct  and  intelligent  view  of  the  public  policy  of  the 
period. 

It  was  as  we  have  already  seen  a long  step  from  the 
blind  bigotry  of  Mr.  Justice  Hull,  in  the  dyer’s  case  in 
1415,  to  the  temperate  language  of  Lord  St.  Leonards  at 
the  middle  of  the  last  century.  It  is  a longer  step  from 
that  decision  in  the  House  of  Lords,  to  the  latest  cases 
in  point,  which  declare  and  define  the  public  policy  of  the 
present  day.  Let  us  look  for  a moment  at  some  of  them, 
and,  having  seen  how  essentially  public  policy  changed 
between  the  reigns  of  Henry  V.  and  Victoria,  we  shall 
see  how,  within  the  past  half  century,  the  doctrine 
of  greater  or  greatest  freedom  in  trade  has  grown  and 
developed  in  the  hands  of  the  judges.  In  a leading  case,. 


32 


more  than  twenty  years  ago,  that  consummate  master  of 
modern  equity  jurisprudence,  Sir  George  Jessel,  M.  R., 
said : 

“If  there  is  one  thing  which  more  than  another 
public  policy  requires  it  is  that  men  of  full  age  and 
competent  understanding  shall  have  the  utmost 
liberty  of  contracting,  and  that  their  contracts  when 
entered  into,  freely  and  voluntarily,  shall  be  held 
sacred  and  shall  be  enforced  by  courts  of  justice. 
Therefore  you  have  this  paramount  public  policy  to 
consider — that  you  are  not  lightly  to  interfere  with 
this  freedom  of  contract.”  (Printing,  etc.,  Co.  v. 
Sampson , L.  R.,  19  Eq.  Cas.  462,  465.) 

This  language  is  adopted  and  approved  in  a later  case 
by  Lord  Justice  Fry,  and  has  been  frequently  quoted  with 
approval,  both  in  English  and  American  cases  relating  to 
contracts  in  restraint  of  trade.  Thus  it  is  paraphrased  in 
a recent  Minnesota  case  as  follows: 

“A  contract  may  be  illegal  on  grounds  of  public 
policy  because  in  restraint  of  trade,  but  it  is  of  para- 
mount public  policy  not  lightly  to  interfere  with 
freedom  of  contract.”  (National  Benefit  Company  v. 
Union  Hospital  Company,  45  Minn.  272.) 

In  1894,  in  the  House  of  Lords,  the  last  remnant  of  the 
old  rule  which  attempted  to  distinguish  between  partial 
and  general  restraints  of  trade,  was  swept  away.  Lord 
Herschell,  in  delivering  his  opinion  in  the  case,  said : 

“Whether  the  cases  in  which  a general  covenant  can 
now  be  supported  are  to  be  regarded  as  exceptions 
from  the  rule  which  I think  was  long  recognized  as 
established,  or  whether  the  rule  is  itself  to  be  treated 
as  inapplicable  to  the  altered  conditions  which 
now  prevail  is  probably  a matter  of  words  rather 
than  of  substance.  The  latter  is  perhaps  the  sound- 
er view.  When  once  it  is  admitted  that,  whether 
the  covenant  be  general  or  particular,  the  question 
of  its  validity  is  alike  determined  by  the  considera- 
tion whether  it  exceeds  what  is  necessary  for  the 


33 

protection  of  the  covenantee,  the  distinction  be- 
tween general  and  particular  restraints  ceases  to  be 
a distinction  in  point  of  law.” 
the  same  case  Lord  Macnaghten  said : 

“In  the  age  of  Queen  Elizabeth  all  restraints  of 
trade,  whatever  they  were,  general  or  partial,  were 
thought  to  be  contrary  to  public  policy,  and,  there- 
fore, void.  In  time,  however,  it  was  found  that  a 
rule  so  rigid  and  far-reaching  must  seriously  inter- 
fere with  transactions  of  every-day  occurrence. 
Traders  could  hardly  venture  to  let  their  shops  out 
of  their  own  hands ; the  purchaser  of  a business  was 
at  the  mercy  of  the  seller;  every  apprentice  was  a 
possible  rival.  So  the  rule  was  relaxed.  It  was  re- 
laxed as  far  as  the  exigencies  of  trade  for  the  time 
being  required,  gradually  and  not  without  difficulty, 
until  it  came  to  be  recognized  that  all  partial  re- 
straints might  be  good,  though  it  was  thought  that 
general  restraints,  that  is,  restraints  of  general  ap- 
plication, extending  throughout  the  kingdom,  must 
be  bad.  Why  was  the  relaxation  supposed  to  be 
thus  limited?  Simply  because  nobody  imagined  in 
those  days  that  a general  restraint  could  be  reason- 
able, not  because  there  was  any  inherent  or  essential 
distinction  between  the  two  cases.  * * * The 

true  view  at  the  present  time,  I think,  is  this : The 
public  have  an  interest  in  every  person’s  carrying 
on  his  trade  freely ; so  has  the  individual.  All  inter- 
ference with  individual  liberty  of  action  in  trading 
and  all  restraints  of  trade  of  themselves,  if  there  is 
nothing  more,  are  contrary  to  public  policy,  and, 
therefore,  void.  That  is  the  general  rule.  But 
there  are  exceptions.  Restraints  of  trade  and  inter- 
ference with  individual  liberty  of  action  may  be  justi- 
fied by  the  special  circumstances  of  the  particular 
case.  It  is  a sufficient  justification,  and,  indeed, 
it  is  the  only  justification,  if  the  restriction  is  reason- 
able— reasonable,  that  is,  in  reference  to  the  inter- 
ests of  the  parties  concerned,  and  reasonable  with 
reference  to  the  interests  of  the  public,  so  framed 


34 


i 


and  so  guarded  as  to  afford  adequate  protection  to 
the  party  in  whose  favor  it  is  imposed,  while  at  the 
same  time  it  is  in  no  way  injurious  to  the  public. 
That,  I think,  is  the  fair  result  of  all  the  authorities.,’ 
(Maxim-Nordenfelt  Guns  & Ammunition  Co.  v.  Nor- 
denfelt  (1894),  App.  Cas.  535,  548,  564,  565.) 

Turning  from  this  late  case  in  England  to  the  later  cases 
in  the  United  States,  we  find  the  same  trend  and  tendency 
in  the  opinions.  Chief  Justice  Fuller,  in  a case  in  the 
Supreme  Court  of  the  United  States,  lately  said : 

“The  decision  in  Mitchel  v.  Reynolds  (i  P.  Wms. 
181,  decided  in  1711)  is  the  foundation  of  the  rule 
in  relation  to  the  invalidity  of  contracts  in  the  re- 
straint of  trade ; but,  as  it  was  made  under  a condi- 
tion of  things  different  from  those  which  now  pre- 
vail, the  rule  laid  down  is  not  regarded  as  inflexible 
and  has  been  considerably  modified.  Public  welfare 
is  first  considered,  and  if  it  be  not  involved  and  the 
restraint  upon  one  party  is  not  greater  than  protec- 
tion to  the  other  party  requires,  the  contract  may 
be  sustained.  The  question  is  whether,  under  the 
particular  circumstances  of  the  case  and  the  nature 
of  the  particular  contract  involved  in  it,  the  contract 
is  or  is  not  unreasonable.”  ( Gibbs  v.  The  Baltimore 
Gas  Company , 130  U.  S.  396,  409.) 

In  the  famous  case  against  the  Sugar  Trust,  to  which 
a further  reference  will  hereafter  be  made,  Mr.  Justice  Bar- 
rett, of  the  Supreme  Court  of  New  York,  who  tried  the 
case  at  Circuit,  in  rendering  his  opinion,  upon  deciding 
the  case,  impressively  said : 

“Excessive  competition  may  sometimes  result  in 
actual  injury  to  the  public  and  anti-competitive  con- 
tracts to  avert  personal  ruin  may  be  perfectly  rea- 
sonable. It  is  only  when  such  contracts  are  publicly 
oppressive  that  they  become  unreasonable  and  are 
condemned  as  against  public  policy.”  ( People  v. 
The  North  River  Sugar  Refining  Company,  54  Hun. 

354, 370.) 


35 


That  was  a notable  decision  and  this  is  notable  language 
from  a judge  at  Circuit,  at  a moment  when  the  public  tem- 
per was  inflamed  against  combinations  of  capital,  in  a case 
involving  vast  interests,  when  “kill  trusts”  was  in  the  air, 
when  the  case  had  been  tried  with  consummate  ability 
upon  behalf  of  the  People,  and  argued  to  the  court  with 
an  ingenuity  and  eloquence  not  often  heard  in  these  de- 
generate days  in  courts  of  justice,  when  all  the  ancient 
learning  had  been  massed,  when  the  sentiments  of  the 
middle  age  upon  the  subject  had  been  most  persuasively 
urged  upon  the  court  in  rounded  periods  and  polished 
phrase;  and  when  a trial  court  might  well  have  been  ex- 
cused for  indulging  in  a little  rhetoric  in  the  popular  vein. 
His  honor  after  all  calmly  said : 

“Excessive  competition  may  sometimes  result  in 
actual  injury  to  the  public,  and  anti-competitive  con- 
tracts to  avert  personal  ruin  may  be  perfectly  rea- 
sonable.” 

In  a comnarativelv  recent  case  in  Minnesota  we  find  this 
sober  language : 

“Modern  investigations  have  much  modified  the 
views  of  courts,  as  well  as  political  economists,  as  to 
the  effect  of  contracts  intended  to  reduce  the  num- 
ber of  competitors  in  any  particular  line  of  business. 
Excessive  competition  is  not  now  accepted  as  nec- 
essarily conducive  to  the  public  good.  The  fact  is, 
that  the  early  common  law  doctrine  in  regard  to 
contracts  in  restraint  of  trade  largely  grew  out  of  a 
state  of  society  and  of  business  which  has  ceased  to 
exist,  and  hence  the  doctrine  has  been  much  modi- 
fied, as  will  be  seen  by  comparison  of  the  early  Eng- 
lish cases  with  modern  decisions  both  English  and 
American.”  {National  Benefit  Company  v.  Union 
Hospital  Company , 45  Minn.,  272.) 

While  thus  larger  and  larger  commercial  freedom  has 
been  attained  in  the  progress  of  time,  as  public  policy  has 
adapted  itself  to  more  modern  conditions,  it  is  curious  to 


36 

notice  how,  in  some  other  directions  and  along  some  other 
closely  parallel  lines,  the  pendulum  has  swung  the  other 
way.  Commercial  contracts  in  restraint  of  trade  have  for 
one  hundred  and  fifty  years  grown  steadily  in  public  favor, 
and  have  constantly  secured  greater  and  greater  sanction 
in  the  courts,  while  in  certain  other  analogous  matters  the 
reins  have  essentially  tightened  up.  Take,  for  example, 
public  opinion  regarding  lotteries.  Only  a comparatively 
short  time  ago  lotteries  were  entirely  legal.  Columbia 
University,  my  alma  mater  in  the  law,  lawfully  secured 
some  part  of  its  endowment,  some  part  of  the  very  fund 
by  which  it  is  now  nurtured  and  maintained,  from  the 
profits  of  a lottery  operated  in  its  interest  in  the  city  of 
New  York.  That  was  only  something  more  than  an  hun- 
dred years  ago.  But  now  no  one  believes  that  any  Ameri- 
can university  will  soon  secure  an  increase  of  its  endow- 
ment in  this  way,  and  with  the  expiration  of  the  charter 
of  the  Louisiana  Lottery,  all  such  business  in  this  country 
became  for  the  present  legally  impossible.  ( Champion  v. 

Ames,  191  U.  S., ; Francis  v.  United  States , 191  U.  S., 

.)  Public  policy  now  strenuously  condemns  what  a 

century  ago  it  frankly  sanctioned  and  approved. 

For  another  example,  consider  the  matter  of  wagers, 
from  a legal  point  of  view,  and  especially  wager  policies 
on  human  life.  A century  or  so  ago,  wagers,  and  actions 
to  enforce  their  payment,  were  sanctioned  by  the  courts 
both  here  and  in  England,  and  all  sorts  of  wagers  were  en- 
forced by  law.  Thus  no  longer  ago  than  1790  it  was 
adjudged  to  be  “within  the  sound  policy  of  the  Kingdom,, 
for  the  Court  of  Kings  Bench  to  serve  as  a stakeholder 
between  two  persons  who  had  made  a bet  whether  or  not 
another  person  had  bought  a wagon  of  a fourth.  ( Good  v. 
Elliott,  3 Durnf.  & East  (Term  Rep.)  693.) 

Lord  Mansfield,  during  the  reign  of  George  III.,  pre- 
sided at  a trial  and  charged  a jury,  with  becoming  gravity, 


37 

upon  the  astonishing  question,  which  had  been  the  subject 
of  a wager  between  the  parties  to  the  suit,  whether  a third 
person,  who  wore  the  clothes  and  bore  the  name  of  a man, 
was  a male  or  a female.  The  jury  found  that  it  was  a 
woman.  Subsequently,  however,  his  lordship,  upon  a 
hearing  before  the  whole  bench,  had  the  grace  to  say: 
“This  case  made  a great  noise  all  over  Europe  ; and  soon 
afterwards,  I own,  I was  sorry.”  (Da  Costa  v.  Jones , Cowp., 
729,  734,  decided  in  1778.) 

Still  later  came  the  famous  litigation  which  the  English 
courts  entertained  over  what  were  known  as  the  Napole- 
onic wagers,  mere  bets  that  the  Emperor  would  or  would 
not  die  within  a certain  time,  or  would  or  would  not  es- 
cape from  St.  Helena  within  a given  time.  In  the  infancy 
of  life  insurance,  wager  policies  on  human  life  were  held 
lawful,  but  come  now,  like  all  other  wagers,  under  what 
we  are  bound  to  regard  the  wholesome  ban  of  our  present 
public  policy. 

While  non-commercial  wagers  of  every  sort  have,  in  the 
process  of  time,  become  illegal,  and  are  now  so  declared 
by  statute  in  perhaps  every  civilized  community,  it  is  an- 
other curious  illustration  of  the  way  in  which  freedom  of 
trade  asserts  itself  in  these  days  that — pari  passu  with  the 
decline  in  respect  of  legal  sanction  of  mere  wagers — deal- 
ing in  futures,  which  are,  of  course,  a form  of  wager,  have 
become  more  and  more  legal  and  are  now  substantially 
lawful  in  all  enlightened  communities.  It  will  certainly 
be  but  a short  time  until  they  will  have  the  same  unques- 
tioned legal  sanction  as  any  other  form  of  trading.  It  is 
already  impossible  to  pass  a federal  statute  making  them 
unlawful,  although  attempts  are  made  at  almost  every  ses- 
sion of  Congress  to  get  a law  of  that  sort  enacted.  In 
many  of  the  states  it  is  true  that  there  are  statutes  upon 
the  subject  in  which  such  dealing  is  more  or  less  positively 
forbidden ; but  here  again  the  courts  have  been  and  are  in 


38 

advance  of  the  lawmakers,  and  more  in  line  with  the  most 
enlightened  public  opinion.  In  spite  of  much  attempt  to 
legislate  such  dealings  out  of  existence,  the  courts  have, 
by  refining  and  distinguishing  the  statutes  which  have  been 
improvidently  enacted  upon  the  subject,  secured  to  them 
a substantially  unquestioned  legality  everywhere.  Other 
illustrations  of  the  truth  of  this  proposition  will  occur  to 
evefy  lawyer. 

It  always  seems  easy  to  people  of  a certain  type  of  mind 
to  believe  that  whatever  strikes  them  as  wrong  in  the  world 
may  be  righted — according  to  their  conception  of  right 
and  wrong — by  the  enactment  of  a statute,  and  trusts  have 
not  escaped  the  full  measure  of  the  application  of  this  fatu- 
ous notion.  We  have,  therefore,  had,  as  I have’  said,  in 
the  United  States  a very  considerable  amount  of  recent 
statutory  law  directed  against  trusts  and  monopolies. 
Almost  every  state  in  the  Union  has  enacted  one  or  more 
such  statutes,  and  the  Federal  Congress  has  done  the  same 
thing.  Passing  by  the  state  legislation,  which  might,  if 
there  were  time,  be  profitably  considered,  let  us  look  for  a 
moment  at  the  Act  of  Congress  of  July  2d,  1890,  known 
as  the  Sherman  Anti-Trust  Law,  entitled  “An  act  to  pro- 
tect trade  and  commerce  against  unlawful  restraints  and 
monopolies,”  to  which  a brief  reference  has  already  been 
made.  The  power  of  the  Federal  government  in  this  be- 
half, it  may  be  here  observed,  is  derived  solely  from  that 
clause  of  the  Constitution  which  confers  upon  Congress 
the  power  “to  regulate  commerce  with  foreign  nations  and 
among  the  several  states  and  with  the  Indian  tribes this 
power,  it  will  be  noted,  is  one  to  regulate  and  not  to  de- 
stroy. It  need,  therefore,  scarcely  be  said  that  assassina- 
tion under  the  guise  of  regulation  is  not  contemplated  by 
this  constitutional  provision,  and  that  consequently  Con- 
gress can  have  no  such  power. 

The  Sherman  Act,  speaking  generally,  declares  unlaw- 


39 

fill  every  contract,  combination  in  the  form  of  trust  or 
otherwise,  or  conspiracy,  in  restraint  of  trade  or  commerce 
among  the  several  states,  or  with  foreign  nations ; it  makes 
every  violation  of  the  act  a misdemeanor,  and  provides  for 
punishments  by  fine  or  imprisonment,  or  both ; it  also  de- 
clares unlawful  monopolies  and  any  attempt  to  monopolize 
or  any  combination  or  conspiracy  to  monopolize  any  in- 
terstate or  international  trade,  and  makes  every  such 
contract  a misdemeanor;  finally  it  provides  for  the  for- 
feiture of  any  property  the  ownership  of  which  is  involved 
in  any  such  illegal  proceeding,  and  gives  a right  to  the 
injured  party  to  sue  for  triple  damages  and  a reasonable 
attorney’s  fee.  This  statute  has  now  been  in  operation 
for  something  more  than  twelve  years  and  a half.  It  has 
been  the  statute  law  of  the  land  for  all  that  time.  We  may 
therefore  now  not  unreasonably  ask  what  has  been  accom- 
plished under  it.  In  passing,  it  may  be  said  that  this  stat- 
ute is  merely  declaratory  of  the  common  law  on  the  subject. 
It  makes  nothing  unlawful  that  was  not  unlawful  by  the 
law  of  the  land  before  it  was  enacted ; all  these  proscribed 
offenses  were  illegal  as  much  before  as  after  the  passage 
of  the  act.  The  statute,  however,  prescribes  a procedure, 
and  fixes  pains  and  penalties  and  forfeitures,  and  formu- 
lates the  law  in  a convenient  way. 

According  to  an  official  publication  issued  by  the  De- 
partment of  Justice,  at  the  end  of  the  year  1902,  there  have 
been  instituted  and  prosecuted  by  the  Federal  govern- 
ment, under  this  act,  in  the  Federal  courts,  up  to  this  time, 
twenty-six  suits;  and,  including  such  suits  as  have  been 
brought  by  private  individuals  under  the  act  in  the  Federal 
courts,  there  have  been  in  all  fifty-three  cases  decided  un- 
der the  act.  Of  the  suits  instituted  by  the  Federal  gov- 
ernment the  greater  number  have  resulted  in  the  partial 
or  total  discomfiture  of  the  prosecution.  The  fact  that 
only  twenty-six  suits  have  been  brought  by  the  Federal 


40 


government  in  about  thirteen  years — that  is,  prosecutions 
under  the  act  at  the  rate  of  two  suits  per  annum — may 
intimate  to  us  that  the  evil  sought  to  be  remedied  by  the 
statute  has  not  been  regarded  at  the  Department  of  Jus- 
tice as  very  widespread  or  very  flagrant;  and  the  further 
fact  that  only  about  four  suits  per  annum,  including  the 
government  suits,  have  been  prosecuted  to  a decision 
throughout  the  whole  of  the  United  States,  seems  to  sug- 
gest that  no  very  great  number  of  the  people  have  smarted 
seriously  under  the  impositions  and  wrongs  to  which  they 
have  been  subjected  at  the  hands  of  the  trusts.  Men  who 
suffer  legal  wrongs  are  usually  quick  enough  in  this  coun- 
try to  go  to  law  about  them.  It  is  therefore  significant 
in  face  of  the  flood  of  desultory  denunciation  of  trusts  in 
the  newspapers  and  from  the  stump,  that , in  twelve  years 
and  a half,  less  than  two  score  of  plaintiffs  have  been  found 
in  all  the  length  and  breadth  of  the  land  to  prosecute  suits 
to  judgment  under  a statute  which  gives  them  a right  to 
triple  damages,  with  costs  and  their  attorney’s  fees,  for  any 
injury  they  establish. 

But  even  this  doesn’t  state  the  case  as  strongly  as  it  can 
be  stated  in  favor  of  the  trusts.  Eliminating  the  govern- 
ment suits  from  the  list  of  fifty-three  cases  decided,  less 
than  thirty  remain,  and  in  more  than  half  of  these  the 
plaintiff  was  defeated  at  the  trial.  Thus  a careful  analysis 
of  this  official  list  shows  that  about  one  person  per  annum  in 
the  United  States,  out  of  a total  population  of  more  than 
seventy-six  millions,  has  secured  a judgment  under  this  act 
against  some  corporation  or  trust  held  to  have  violated  the 
(aw.  That  would  seem  to  be  a result  somewhat  out  of 
proportion  to  the  hue  and  cry  everywhere  set  up  over 
trusts.  Some  of  us  may  be  pardoned  for  reading  into 
these  figures  something  more  than  a suspicion  that  all  this 
clatter  and  manufactured  wrath  about  monopolies  and 
trusts  is,  as  a matter  of  fact,  the  merest  crackling  of  thorns 
under  a pot. 


41 


Turning  to  the  twenty-six  suits  in  the  list  as  being  those 
instituted  and  prosecuted  by  the  government  to  date,  we 
find  that  the  United  States  as  complainant  lost  eleven  of 
them  outright ; that  two  are  still  pending ; two  practically 
a draw — neither  side  accomplishing  anything  substantial 
— and  that  one  was  a trifling  litigation,  somewhat  be- 
neath the  dignity  of  a sovereign  power.  That  leaves,  out 
of  the  twenty-six  suits,  ten  in  which  the  government  won. 
Of  this  ten,  four  were  won  against  combinations  of  labor- 
ing men — leaving  six  as  the  total  number  in  which  the 
United  States  have  prevailed  thus  far  in  litigation  against 
trusts  strictly  so-called.  Of  this  six,  three  were  cases  in 
which  the  offense  proven  was  clearly  illegal  at  common 
law,  and  in  which  a decision  for  the  government  could 
have  been  secured  as  well  without  the  statute  as  with  it; 
two  others  of  the  six  were  what  might  be  called  legal 
boomerangs — the  reference  here  being  to  the  Trans-Mis- 
souri Freight  Association  case  and  to  the  Joint-Traffic 
Association  case.  In  both  of  these  suits  the  success  of  the 
government  in  the  outcome  has  been — it  is  not  telling  tales 
out  of  school — very  generally  regarded  by  the  friends  of 
litigation  of  this  sort  as  supremely  unfortunate. 

In  each  of  them  there  was  an  application  of  the  Sherman 
law  to  railways — something  which  it  has  been  strenuously 
insisted  was  not  within  the  contemplation  of  Congress 
when  the  statute  was  formulated  and  enacted — and  both  of 
these  decisions  make  unlawful  traffic  or  pooling  arrange- 
ments between  what  are  known  as  parallel  and  competing 
lines  of  railway.  As  a result,  the  railways  have  been  com- 
pelled to  abandon  those  particular  forms  of  association  or 
arrangement  inter  sese,  and  the  practical  and  substantial 
net  result  to  the  public  from  the  victory  of  the  govern- 
ment in  these  two  cases  has  been  the  creation,  in  their 
place  and  stead,  of  such  larger  consolidations  as  the  South- 
ern Pacific  Company,  and  the  Northern  Securities  Com- 


/ 


42 

pany,  and  the  absorption  of  the  Baltimore  & Ohio  by  the 
Pennsylvania  Railroad;  so  that  the  Trans-Missouri 
Freight  Association  case  and  the  Joint-Traffic  case,  what- 
ever else  they  may  have  been  worth  to  the  enemies  of  mo- 
nopoly, may,  in  a very  proper  sense,  be  declared  to  be 
God-fathers  both  to  the  Great  Southern  and  to  the  Great 
Northern  railway  mergers — a result  which  cannot  be  ex- 
ceptionally gratifying  to  the  promoters  of  such  litigation. 

Haec  fabula  docet  that  if  the  litigation  now  pending 
against  the  Northern  Securities  Company  shall  result  in 
a legal  victory  for  the  government,  or  for  the  state — a 
very  remote  contingency — it  will  be  all  very  well  and  just 
the  same,  forsooth,  as  far  as  the  public  is  concerned.  We 
shall  then  have  in  its  turn  the  “Southern  Insecurities  Com- 
pany, Limited,”  or  some  other  substantially  equivalent 
devise,  to  take  the  place  of  the  present  merger  organiza- 
tion, and  to  accomplish  in  some  other  way  the  same  end. 
At  the  very  best  for  the  prosecution  it  can  only  be  another 
Sugar  trust  case.  The  thing  itself  called  uthe  merger  ’ will 
survive  any  lawsuit,  and  will  remain  and  persist.  It  is  now, 
and  as  of  to-day,  a fait  accompli,  and  the  hands  of  the  clock 
in  such  matters  do  not  go  backward.  To  all  such  de- 
structive litigation — of  which  this  is  here  taken  only  as  a 
type — we  interpose  a revised  version  of  an  old  legal 
maxim : “De  maximis  non  curat  lex;”  and  herein  consists 
the  applicability  thereof.  It  interposes,  along  the  broad- 
est economic  lines,  an  equitable  demurrer  to  the  jurisdic- 
tion ; the  case  is  not  set  for  trial  in  the  proper  forum,  and 
the  decree,  whatever  it  may  be,  will  in  a catholic  sense  be 
coram  non  judice.  We  admit  all  the  complainant’s  formal 
case  and  then  move  for  judgment  for  the  defendants. 

This  is  what  I mean : Some  things,  some  sorts  of  things, 
are  for  the  courts  and  the  judges,  and  some  things,  some 
sorts  of  things,  are  of  an  essentially  extra-judicial  cogni- 
zance. In  a free  country  it  is  inevitable  that  we  go  to  law 


43 


over  trifles ; that  is  to  say,  about  things  trifling  as  compared 
with  great  economic  tendencies,  with  slow  evolutions,  with 
centuries  and  cycles  of  human  development  and  progress. 
Courts  and  statutes  have  been  established  and  enacted  in 
contemplation  of  this  truth.  Our  rational  conception  of 
the  true  and  inevitable  jurisdiction  of  the  courts  has  these 
metes  and  bounds.  Some  things  we  instinctively  hold  too 
large  for  the  judicial  pint  pot,  however  much  they  seem 
to  come  within  the  formal  language  of  some  statute. 
Thus,  where  the  butcher  sues  on  his  past  due  account  and 
gets  his  judgment  for  $18.14,  including  his  interest  and 
costs,  it  squares  with  our  conception  of  a due  administra- 
tion of  justice.  Why  shouldn’t  one  pay  for  his  chops  and 
steaks?  Another  forecloses  his  mortgage  and  enters  into 
possession;  a third  probates  his  father’s  will  and  that  is 
right  enough.  Then  again  the  machinery  of  our  criminal 
law  makes  it  safe  for  us  to  go  about  o’  nights,  and  protects 
our  exposed  property.  Of  such  is  the  scope  and  purpose 
of  our  law.  For  these  things  and  for  other  things  like 
these  were  courts  and  statutes  and  law  and  lawyers 
devised. 

Moreover , it  is  the  proper  function  of  the  law  to  do  what 
it  can  and  not  to  try  to  do  what  it  can't.  Mrs.  Partington 
with  her  broom  was  all  very  well  in  the  face  of  a puddle  in 
the  back  yard;  but  when  it  came  to  sweeping  away  the 
Atlantic  ocean — well,  that  was  another  story,  and  the  good 
lady  found  it  out.  In  the  small  joke  that  even  the  creative 
power  of  the  Almighty  must,  in  the  very  nature  of  things, 
fall  short  of  the  ability  to  make  a two-year-old  calf  in  five 
minutes,  there  is  the  easy  suggestion  that  it  is  as  much  be- 
yond the  contrivance  of  the  average  legislature  or  legisla- 
tor to  devise  a statute  which  can  stay  an  inevitable  trend 
and  tendency  in  the  trade  and  commerce  of  mankind,  and 
how  beside  and  beyond  the  wit  of  man  it  must  ever  be  to 
prosecute  successfully  a litigation  which  thwarts  and  op- 


44 


poses  itself  to  what  the  gravity,  and  the  centripetal  forces 
of  the  new  century  are  imposing  upon  us  and  our  business 
affairs.  In  such  a matter  as  lies  at  the  bottom  of  this 
“merger”  litigation — of  which  the  formation  of  the  North- 
ern Securities  Company  is  but  a symptom  or  a suggestion 
— we  find  ourselves,  when  we  take  a large  view  of  the 
whole  situation  (and  it  is  idle  and  like  an  ostrich  to  take 
any  other  view)  face  to  face  with  the  infinities,  with  gravity 
and  the  inevitable,  with  the  eternal  verities,  with  things  too 
big,  too  imperative,  too  elementary  for  courts  and  statutes 
and  the  paid  wrangling  of  attorneys  before  the  bar. 

Coming  back  to  the  Federal  statute,  and  looking  over 
the  whole  field,  and  having  regard  to  all  the  litigation  un- 
dertaken or  pending  under  the  present  law,  it  is  not  intem- 
perate or  unfair  to  say  that  the  Sherman  Law,  although 
drawn  by  competent  lawyers  and  with  the  greatest  care, 
has  been  found  utterly  inadequate  to  check  or  to  mitigate 
any  of  the  alleged  social  evils  to  which  reference  was  made 
in  its  enactment;  neither  has  the  passage  of  the  statute, 
and  its  presence  in  the  statute  book,  had  any — even  the 
smallest — deterrent  effect,  as  far  as  can  be  perceived,  as  to 
the  creation  of  new  trusts.  As  Judge  Grosscup  of  the  Fed- 
eral Court  in  Chicago  pointed  out,  in  a recent  address  at 
the  University  of  Nebraska,  it  appears  that  of  the  one 
hundred  and  twelve  presently  subsisting  and  active  trusts 
in  the  United  States,  all  but  thirteen  have  been  created 
since  the  passage  of  the  Sherman  Act.  This  statute,  there- 
fore, seems  to  have  not  even  the  slightest  tendency  either 
to  do  away  with  trusts  after  they  are  created  or  to  prevent 
their  creation.  We  may,  therefore,  be  excused  for  won- 
dering what  such  a statute  is  good  for,  or  whether  it  is 
good  for  anything.  And  from  what  has  been  accomplished 
in  these  dozen  years  under  the  Sherman  Law  we  may 
“guess,”  as  a Yankee  might  say,  what  is  likely  to  be  ac- 
complished in  future  by  amendments  thereto,  and  by  the 


45 

further  legislation  of  similar  sort  now  proposed  or  pending 
in  Congress,  or  elsewhere. 

We  may  perhaps  find  some  illumination  upon  this  point 
in  considering  for  a moment  what  happens  in  the  case  of 
some  other  statutes  that  fly  in  the  face  of  the  commercial 
community  and  thus  attempt  the  impossible.  Such  stat- 
utes are  about  the  most  useless  of  all  useless  things.  For 
example,  there  is  in  New  York  a highly  penal  statute 
against  usury — something  always  especially  hateful  to 
rural  legislators — and  yet  millions  of  dollars  of  paper  daily 
are  frequently  bought  and  sold  and  discounted  in  that 
state  in  flat  defiance  of  the  statute,  to  which  as  of  course 
not  the  slightest  real  attention  is  ever  paid  when  the  mar- 
ket rate  for  money  is  different  from  the  statute  rate;  so 
that  if  one  might  have  in  exchange  for  a lifetime  of  toil 
the  proceeds  in  cash  of  a single  hour's  output  of  paper 
tainted  with  usury  in  Wall  street  in  a tight  money  market, 
he  would  have  a glut  of  riches.  The  statute  is  not  en- 
forced because  it  is  absurd  and  unenforceable,  and  because 
the  commercial  community  very  properly  resents  such  leg- 
islation, and  recognizes  that  it  may  safely  ignore  such  stat- 
utes as  run  counter  to  the  established  and  subsisting  order 
of  things. 

We  laugh  now  at  the  Pope's  bull  against  the  comet  (but 
men  took  it  seriously  enough  then),  and  ac  the  decree  of 
the  Convention  re-establishing  God  and  the  immortality 
of  the  soul  from  one  end  of  France  to  the  other,  which 
was  serious  and  solemn  business  among  a highly  intelli- 
gent people  little  more  than  an  hundred  years  ago.  When 
are  we  to  begin  to  see  the  humor  in  the  fantastic  notion 
that  a federal  statute  known  as  the  “Sherman  Act”  can 
block  the  wheels  of  our  business  enterprises,  can  put  a stop 
to  the  progress  of  our  affairs,  and  stay  the  inevitable  in 
the  evolution  of  our  system  of  transportation  by  rail  lines? 
Once  we  had  stage  coaches,  and  mail  carriers  on  horse- 


46 

back,  then  little  rail  lines  from  A.  town  to  B.  town;  then 
the  first  consolidations;  then  the  trunk  lines;  then  sys- 
tems ; now  mergers,  or  whatever  you  care  to  call  them.  To- 
morrow it  will  be  something  else,  larger  and  fitter  for  the 
service  in  a progression  as  certain  as  the  tides  and  as  re- 
sistless as  gravity  or  death.  As  well  might  Sherman  acts 
be  directed  against  the  stars  in  their  courses ; as  well  might 
courts  seek  to  block  the  recurrence  of  the  seasons.  What 
sort  of  a statute,  or  what  kind  of  a court  does  any  man  now 
think  could  have  prevented  the  passing  of  the  stage  coach, 
or  of  the  local  railway ; or  by  what  solemn  pronouncement 
of  a court  of  law  could  the  recent  railway  consolidations 
and  reorganizations  have  been  prevented?  By  what  sort 
of  a writ  of  injunction  or  by  what  cunningly  devised  man- 
damus shall  we  regulate  the  rising  of  the  sun  and  the  go- 
ing down  of  the  same?  There  are  some  things  that  courts  and 
statutes  cannot  do.  Judges  and  lawmakers  who  set 
themselves  against  a well-defined  tendency  in  things,  who 
try  to  stem  a tide,  make  little  progress,  and  all  who  row 
against  the  current  of  Niagara  are  buried  in  the  same 
grave. 

All  the  allegations  of  these  bills  of  complaint  that  are 
solemnly  drawn  up  against  this  or  that  trust  may  be  true, 
a thousand  times  true,  and  more.  No  doubt  they  are.  But 
the  question  really  at  issue  is  economic  rather  than  legal. 
It  is  not  a case  for  lawyers  and  law  courts.  It  involves  is- 
sues too  big  for  a mere  pleader — issues  to  be  tried  and 
worked  out  and  finally  decided,  not  by  any  judge,  however 
wise;  not  according  to  any  formal  statute,  however  craftily 
it  may  have  been  drawn.  If  the  Northern  Securities  Com- 
pany— taken  now  merely  as  a type — stands  for  something 
useful,  it  is  big  enough  to  take  good  care  of  itself.  No  stat- 
ute and  no  court  can  harm  it  very  much.  If  it  cumbers 
the  ground  it  will  die  of  itself.  If  it  have  in  it  the  seeds  of 
death  it  can’t  be  kept  long  alive  by  all  its  nurses.  And  it 


47 


can’t  be  talked  to  death  or  sued  out  of  existence  if  it  is  serv- 
ing some  economically  useful  purpose  in  modem  Amer- 
ican railroading.  Whether  it  is  or  not,  time  and  not  liti- 
gation will  tell.  It  is  on  its  trial  to-day  much  more  in  the 
forum  of  public  opinion  and  in  the  fiery  furnace  of  our 
present  economical  competition  than  it  can  ever  be  in  any 
court  of  law.  Its  life  and  death  struggle  will  be  in  the  field, 
not  before  any  judicial  tribunal. 

We  need  not  go  far  afield  to  find  evidence  in  support  of 
this  view.  How  many  times,  for  an  example,  has  the 
Standard  Oil  Company,  within  the  past  dozen  years,  been 
solemnly  adjudicated  and  legislated  out  of  existence;  and 
in  how  many  court  houses  and  state  houses,  from  one  end 
of  America  to  the  other,  has  its  death  warrant  been  signed 
and  sealed  and  read  out  to  a waiting  world  with  unction 
and  emphasis?  God  knows.  And  yet  in  spite  of  all  it  was 
never  more  alive,  more  virile  or  more  efficient  than  now 
—and  no  one  at  any  time  has  ever  seen  any  crepe  on  the 
big  door  at  26  Broadway.  Let  not  the  shoemaker  go  be- 
yond his  last.  De  maximis  non  curat  lex. 

Some  other  recent  litigation  against  trusts  under  state 
statutes  or  at  common  law  has  been  so  notably  barren  of 
results  that  it  may  instructively  be  considered  at  this  point. 
Take  for  example  the  famous  Sugar-trust  litigation  in  New 
York,  to  which  I have  already  made  some  passing  refer- 
ences. A few  years  ago  the  state  of  New  York,  by  its  at- 
torney general,  commenced  two  suits  in  the  Supreme 
Court  of  that  state,  the  purpose  of  which  was  to  destroy 
the  Sugar  Refineries  Company,  then  popularly  known  as 
the  Sugar  trust.  These  actions  were  pressed  with  much 
legal  intelligence  and  vigor,  and,  after  a sweeping  victory 
in  the  lower  court,  resulted  in  a judgment  in  the  court  of 
last  resort  to  the  effect  that  the  trust  was  illegal,  and  could 
not  lawfully  transact  its  business  in  that  state.  Thereafter, 
and  to  carry  out  the  provisions  of  this  solemn  adjudica- 


48 

tion,  some  part  of  the  property  of  the  trust  was  placed  in 
the  hands  of  receivers;  but  in  a surprisingly  short  space 
of  time  the  judicial  machinery  ceased  to  work,  and  the 
property  was  returned  into  the  hands  of  its  owners  by  due 
process  of  law.  Presto ! The  trust  was  reorganized  as  a 
corporation  under  the  laws  of  an  adjoining  state,  and  from 
that  day  to  this  it  has  uninterruptedly  carried  on  its  busi- 
ness, as  a New  Jersey  corporation,  at  No.  117  Wall  street, 
wTith  precisely  the  same  force  and  effect  as  to  the  public 
that  it  formerly  did  as  the  Sugar  Refineries  Company. 

Thus,  a vast  deal  of  time  and  money  and  effort  were 
spent  in  New  York  in  driving  the  sugar  refiners  of  that 
state  across  the  North  River  for  a charter,  and  in  com- 
pelling them  slightly  to  change  the  form  of  their  organiza- 
tion, but  without  to  the  extent  of  one  iota  altering  the 
conditions  under  which  they  do  their  business.  When  the 
suits  were  brought  they  were  doing  their  business  in  a pru- 
dent and  economical  manner,  and  it  was  not  possible  by 
litigation  to  drive  them  into  doing  it  in  an  imprudent  and 
unprofitable  manner.  It  ought  to  have  a sobering  effect 
upon  some  of  us  here  in  Minnesota  to  reflect  upon  the 
fact  that  all  the  money  that  was  spent  in  that  litigation, 
and  which  resulted  in  absolutely  nothing  as  far  as  the  pub- 
lic is  concerned,  had  to  be  repaid  by  that  same  short-sight- 
ed public,  part  of  it  in  the  shape  of  taxes  to  the  state  of 
New  York,  and  the  rest  of  it  in  the  prices  the  public  was 
called  upon  to  pay  for  sugar.  The  state  was  sure  to  col- 
lect the  taxes,  and  the  sugar  people  not  unnaturally  wanted 
back  from  the  community  what  money  they  had  been  com- 
pelled to  spend  in  that  Quixotic  litigation. 

The  railway  situation  in  England  throws  an  interesting 
side-light  on  the  subject.  In  1872,  a report  was  made  to 
Parliament  by  a committee  theretofore  appointed  to  inves- 
tigate and  report  back  the  condition  of  the  English  rail- 
ways. The  report  of  this  Select  Committee  on  Railway 


49 

Amalgamation  contains  much  illuminative  matter  and  par- 
ticularly makes  the  significant  statement  that,  from  the 
commencement  of  railway  construction  in  England  down 
to  1872,  Parliament  and  the  English  courts  alike  had  unit- 
ed in  vigorous  efforts  to  prevent  the  consolidation  of  in- 
dependent railroad  companies  in  that  country ; that  during 
the  same  period  of  time,  charters  had  been  granted  by 
Parliament  to  over  six  hundred  railroad  companies;  but 
that  in  1872  the  railway  business  of  the  Kingdom  was  sub- 
stantially performed  by  no  more  than  about  six  companies. 
At  the  same  time  the  English  people  are  well  served  by 
their  common  carriers;  they  have  costly  roadbeds,  fast, 
punctual  and  an  exceptionally  safe  service,  and  rates  only 
somewhat  above  the  lowest  that  are  charged  by  any  rail- 
roads in  the  world. 

The  same  thing  has  been  equally  true  in  every  part  of 
the  United  States,  in  respect  to  railway  consolidation. 
Thus,  in  New  England  every  sort  of  effort  was  made,  both 
by  statute  and  by  litigation,  to  prevent  railway  combina- 
tion, but  to-day  three  consolidated  companies  control 
about  all  the  railway  business  that  is  worth  controlling  in 
the  six  New  England  states.  So  in  New  York,  where  we 
find  the  New  York  Central  made  up  of  a half  score  of 
smaller  companies;  in  Pennsylvania,  where  the  Pennsyl- 
vania Railroad  controls  almost  the  entire  carrying  busi- 
ness of  the  state.  In  the  South,  where  three  or  four  amal- 
gamated companies  do  almost  all  the  carrying  business. 
We  have  all  of  us  everywhere  tried  manfully  to  prevent 
combination  among  railways  throughout  the  United 
States,  certainly  with  no  large  measure  of  success.  Isn't 
it  high  time  for  even  the  dullest  of  us  to  learn  that  it  can’t 
be  done? 

Within  the  limits  of  no  state  in  the  Union  is  this  to  be 
seen  in  a clearer  perspective  than  in  the  state  of  Texas. 
At  the  end  of  the  Civil  War,  Texas  had  comparatively 


50 


few  miles  of  railway  and  no  communication  whatever  by 
rail  with  the  outside  world.  As  soon  as  railway  construc- 
tion commenced  there,  statutes  of  the  most  stringent  char- 
acter were  enacted  against  the  consolidation  of  independ- 
ent companies.  In  1875,  the  Constitution  of  the  state 
went  to  the  extreme  of  the  language  in  forbidding  every 
such  concert  or  combination,  and  a State  Railroad  Com- 
mission with  plenary  powers  was  duly  created  to  safe- 
guard the  public  interest  along  these  lines.  Suits  have 
also  been  repeatedly  prosecuted  by  the  state  authorities  to 
check  and  prevent  amalgamation.  As  a net  result  of  all 
these  visionary  doings,  Texas  now  has  something  over  ten 
thousand  miles  of  well-built  and  well-equipped  railroad, 
substantially  all  of  which  fall  into  one  or  other  of  three 
systems,  and  with  a single  exception,  which  for  the  mo- 
ment exists  but  does  not  much  make  against  the  rule,  all 
the  railroads  of  any  commercial  consequence  in  that  state 
are  substantially  owned  and  absolutely  controlled  by  three 
gentlemen  who  live  near  together,  not  far  from  the  cor- 
ner of  Fifty-seventh  street  and  Fifth  avenue,  in  the  city  of 
New  York. 

Although  there  is  criticism  of  trusts  in  plenty,  and  al- 
though we  have  had  for  many  years  a wealth  of  sugges- 
tion 011  the  subject,  it  is  not  easy  to  find  out  and  to  formu- 
late exactly  and  precisely  what  the  critics  would  like  to 
have.  This  difficulty  seems  to  have  confronted  the  plead- 
ers in  drafting  their  bills  of  complaint  in  the  various  suits 
that  have  been  brought  against  trusts.  It  is  found  to  be 
far  easier  to  deliver  one’s  self  in  rounded  phrase  upon  the 
evils  of  monopoly,  and  to  prate  piously  about  the  op- 
pression of  the  poor,  than  to  draw  a pleading  in  a suit  in 
equity  so  as  not  to  have  it  demurrable.  We  may  infer 
from  the  legislation  we  are  having  that  the  drafters  of 
statutes  against  trusts  have  likewise  been  confronted  with 
the  practical  difficulty  of  putting  down  on  paper  some- 


5* 

thing  that  will  stick.  Nor  has  it  been  found  easy,  even 
after  the  suit  is  brought  and  a demurrer  to  the  complaint 
overruled,  to  make  intelligent  and  adequate  proof  of  the 
wrongs  complained  of.  Much  of  the  testimony  offered  on 
behalf  of  the  complainants  in  such  of  these  trust  cases 
as  get  to  trial  has  been  puerile  and  grotesque ; so  that,  on 
some  familiarity  with  the  testimony  in  many  of  these 
cases,  one  is  not  surprised  to  find  either  that  so  few  suits 
are  brought,  or  that  so  few  of  those  tried  result  in  judg- 
ments against  the  trusts. 

In  one  case  brought  under  the  Sherman  Law,  to  which 
my  attention  has  lately  been  called,  ( Whitwell  v.  Conti- 
nental Tobacco  Co.,  Circuit  Court  of  Appeals  for  the  Eighth 
Circuit,  May.  1903),  where  the  complaint  bristled  with  al- 
legations of  wrongdoing  on  the  part  of  the  defendant 
trust,  it  turned  out,  upon  a careful  sifting  of  the  material 
allegations  of  the  bill,  that  the  gravamen  of  the  complaint, 
and  the  only  specific  wrong  actually  alleged,  was  that  the 
trust — a private  corporation — refused  to  sell  its  product 
to  the  complainant  on  terms  attempted  to  be  dictated  to 
it  by  the  complainant,  but  that  on  the  contrary  it  insisted 
upon  its  right  to  do  its  own  private  business  in  its  own 
way  and  on  its  own  terms.  Lawyers  find  little  difficulty  in 
drawing  their  pleadings  when  a plain  violation  of  law  is  to 
be  stated,  and  little  trouble  in  proving  their  cases,  when 
they  have  got  a case  to  prove ; but  the  mouthings  of  blath- 
erskites about  “monopolies,”  and  frothy  twaddle  about  the 
evils  of  “combinations’’  and  the  hidden  iniquity  that  lurks 
in  “conspiracies  against  trade  and  commerce,”  when  re- 
duced to  writing,  or,  as  a mathematician  would  say,  when 
reduced  to  their  lowest  terms,  whittle  down  very  thin. 

What  then  really  is  it  that  the  critics  want  ? Do  they  want 
to  regulate  trusts  in  the  public  interest,  or  to  regulate 
them  out  of  existence?  Do  they  want  prices  higher  or 
lower?  If  so,  what  prices,  the  prices  of  their  own  prod- 


52 


uct  or  those  of  other  people?  Do  they  want  more  business 
done,  or  less?  Do  they  want  to  press  the  oak  back  into 
the  acorn,  and  relegate  onr  business  to  primitive  condi- 
tions? We  know  exactly  what  Andrew  Jackson  wanted. 
His  ideal  twentieth-century  commonwealth  was  to  get  on 
without  banks.  He  frankly  put  that  in  writing,  gave  his 
reason  and  signed  his  name  to  it.  We  wish  that  our  in- 
genuous anti-trust  friends,  instead  of  treating  us  to  gen- 
eralities, and  wearying  us  with  declamation,  would  be  as 
specific  in  their  statements,  and  tell  us  precisely  what  they 
want  and  why  they  want  it.  Their  propaganda  is  too 
vague,  and  the  remedies  they  propose  out  of  all  proportion 
to  any  mischief  in  sight.  It  is  an  amazing  fact  that  during 
the  present  session  of  Congress  more  than  one  hundred 
different  so-called  anti-trust  bills  have  been  introduced  in 
the  two  houses,  proposing  more  than  an  hundred  cures 
for  as  many  alleged  public  grievances  in  the  nature  of 
trusts ; of  the  best  of  which  bills  it  may  be  confidently  as- 
serted that  they  are  no  whit  better  than  the  Sherman  Law 
and  of  most  of  them  that  they  seek  to  enact  impossible 
and  transparent  nonsense  into  our  Federal  statute  book. 

Sometimes  it  is  over-capitalization  and  watered  stock 
that  are  the  subjects  of  their  animadversion ; and  it  is 
sometimes  pretended  that  there  is  some  mysterious  ratio 
or  relation  between  the  amount  of  the  nominal  capital 
stock  of  a concern  and  the  price  it  can  get  in  the  market 
for  its  goods,  or,  to  state  it  in  another  wav,  that  dividends 
must  be  earned  on  watered  stock  and  that  that  considera- 
tion fixes  trust  prices.  People  who  know  anything  know 
better  than  that,  but  still  this  sort  of  nonsense  goes  about 
and  does  service  sometimes  as  an  anti-trust  argument.  No 
amount  of  knock-out  is  able  to  kill  it.  One-half  minute’s 
sober  thinking  should,  it  seems,  make  an  end  of  this  ex- 
ceptionally imbecile  proposition.  If  any  man  thinks  that 
increasing  his  nominal  capital  stock  will  have  any  tend- 


53 


ency  to  increase  the  earning-  capacity  of  his  property,  let 
him  try  it ; and  if  any  man  sees  any  connection  between  the 
capital  stock  of  the  corner  grocefy  and  the  price  of  soap 
and  candles,  except  possibly  as  the  larger  capitalization 
makes  a little  for  lower  prices  on  the  average — why,  we 
can’t  stop  to  argue  with  him ; and  if  anyone  thinks  that  a 
railway  capitalized  at  sixty  thousand  dollars  a mile  can 
charge  twice  as  much  for  the  transportation  it  has  to  sell 
as  a railway  that  is  capitalized  at  thirty  thousand  dollars 
a mile — or  any  fraction  of  a cent  more  because  of  its  great- 
er capitalization — why,  that  man  is  a hopeless  case.  The 
sober  fact  is  that  over-capitalization  cures  itself,  so  far  as 
there  is  any  call  for  a cure ; and  as  for  watered  stock  the 
market  usually  takes  very  good  care  of  that.  The  late  ex- 
Speaker  Reed,  in  the  article  already  referred  to,  in  speak- 
ing to  this  point,  aptly  says : 

“But  cannot  we  stop  this  stock  watering?  Must 
we  not  do  it?  Well,  the  value  of  stock  is  very  much 
a matter  of  opinion.  It  will  be  noticed  that  the 
stock  of  one  of  our  greatest  companies  can  be 
bought  for  less  than  forty  dollars.  The  par  value 
is  one  hundred.  In  the  judement  of  the  world  there 
is  sixty  per  cent  water,  and  in  the  market  the  water 
is  squeezed  out.  Could  a legislature  do  it  more  ef- 
fectually? As  that  same  stock  once  sold  at  fifty-five, 
there  was  a time  when  there  was  only  forty-five  per 
cent  of  water.  Is  it  proposed  in  the  new  constitu- 
tional amendment  to  specify  how  often  the  test  for 
water  is  to  be  applied?  Are  the  stockholders  to  be 
assessed  daily  for  the  variations  of  each  dav,  or  are 
the  directors  to  be  indicted  daily?  Shall  officers  of 
the  Government  determine  the  value,  or  the  public 
in  open  market  ?” 

Then,  again,  we  hear  that  publicity  is  the  cure-all;  but 
here  again  only  a little  reflection  serves  to  advise  us  that 
free  men  cannot  be  compelled,  in  a free  country,  by  a stat- 
ute, to  disclose  what  they  wish  to  conceal  about  their  busi- 


54 


ness  concerns.  People  who  are  sanguine  on  this  point  had 
better  study  railroad  reports  a bit,  to  gain  a realizing 
sense  of  the  capacity — rising  almost  to  genius — that  men 
sometimes  display  for  not  disclosing  things.  Some  of 
these  documents  put  Talleyrand  to  the  blush.  Again  Mr. 
Reed  well  says: 

‘‘Almost  everybody  announces  that  what  we  need 
is  ‘publicity/  Even  this  is  vague.  Do  you  expect 
the  public  to  be  intrusted  with  the  cost  sheets?  It 
you  do  not,  then  what  will  your  publicity  amount 
to?  If  you  mean  by  ‘publicity1  such  a statement  as 
will  enable  the  outsider  to  buy  wisely,  or  the  stock- 
holder to  sell  at  the  true  value,  I fear  we  may  be 
going  beyond  the  province  of  free  government, 
which  certainly  thus  far  has  left  the  task  of  keeping 
his  fingers  out  of  the  fire  to  the  citizen  whose  fingers 
they  were.” 

Next  comes  a Solon  with  a bill  up  his  sleeve  for  lim- 
iting fortunes  to,  say,  a maximum  figure  of  ten  millions 
of  dollars.-.  Two  such  measures  are  now  actually  pending 
in  Congress,  and  one  or  both  of  them  may  become  laws. 
A scoffer  has  suggested  that  it  would  have  been  better 
to  provide  for  a minimum  of  no  more  than  one  hundred 
thousand  dollars  for  each  adult  male  in  the  country.  So 
far  from  any  such  beneficent  provision,  however,  it  is  by 
these  enactments  proposed,  on  the  contrary,  to  confis- 
cate or  forfeit  any  personal  holdings  of  property  in  ex- 
cess of  the  millionaire  figure  named.  It  might  be  just 
as  well,  before  relying  too  much  on  a remedy  of  this 
sort,  to  devise  some  workable  scheme  for  collecting 
personal  property  taxes,  which  are  only  a sort  of  legal 
confiscation  annually  of  a small  per  cent  of  the  great 
fortunes  proposed  by  this  legislation  to  be  confiscated  at 
once  and  in  toto.  Until  we  can  collect  the  penny  once  a 
year  we  had  better  not  try  to  take  the  pound  in  fifteen 
minutes. 


55 


It  is  the  function  of  a critic  to  criticise,  and,  at  this  mo- 
ment being  only  a critic,  I have  not  attempted  to  suggest 
what  legislation  of  this  sort,  if  any,  might  be  expedient 
and  politic;  but  rather  to  point  out  what  appears  to  me 
Lo  be  the  inherent  weakness  and  inutility  of  the  existing 
statutes  of  this  character.  There  is,  it  goes  without  say- 
ing, such  a thing  as  an  unlawful  restraint  of  trade,  which 
is  and  ought  to  be  contrary  to  public  policy.  My  propo- 
sition is,  however,  that  the  legislation  upon  the  subject  in 
the  United  States,  both  state  and  federal,  has  thus  far 
been  for  the  most  part  the  outcome  of  a condition  of  the 
public  temper  not  calculated  to  promote  sane  legislation ; 
that  it  has  been  out  of  joint,  and  out  of  line  with  the  most 
enlightened  public  policy;  that  all  such  legislation  is  un- 
scientific, impolitic  and  fatuous,  and  that  it  cannot  abide 
the  wear  and  tear  of  even  the  next  short  time.  The  furore 
which  occasioned  it  is  already  subsiding,  and  the  country 
will  grow  more  and  more  away  from  it,  and  leave  it  stand- 
ing as  a monument  to  the  over-zeal  of  ill-instructed  or 
half-instructed  legislators. 

It  will  in  the  end  do  no  great  harm,  and  it  will  do  some 
good  if  it  serve  as  a warning  to  future  lawmakers,  that 
statutes  which  fly  in  the  face  of  enlightened  public  senti- 
ment had  better  not  be  enacted,  and  will  not  be  enforced 
by  the  courts  of  a free  country ; that  such  statutes  have  no 
place  in  the  corpus  juris  of  an  highly  civilized  commercial 
community;  that  water  cannot  be  legislated  to  run  up  hill; 
and,  finally,  that  it  is  the  true  function  of  the  legislator  to 
catch  the  spirit  of  the  time  and  the  drift  of  affairs,  to  re- 
flect them  in  his  work,  and  laying  aside  his  ill-digested 
theories  and  his  academic  speculations  as  to  what  might, 
in  Utopia,  be  ideally  excellent,  to  do,  in  the  matter  of  stat- 
ute making,  what  he  can,  and  not  try  to  do  what  he  can- 
not. 


56 

Gentlemen  of  the  University : I have  not  believed  that 
upon  such  a subject  as  this  I ought  to  come  to  you  with 
a loose,  extemperaneous  harangue,  or  to  address  you  with 
the  fopperies  of  rhetoric;  I have  therefore  brought  you  in 
sober  phrase  the  message  with  which  I have  felt  myself 
charged.  It  is  for  university  men  to  lead,  and  not  to  fol- 
low, the  thinking  of  their  generation ; to  be,  on  such  ques- 
tions as  we  have  now  been  considering,  not  Andrew  Jack- 
sons,  with  minds  befuddled  over  South-Sea  Bubbles,  but 
rather  Nicholas  Biddles,  in  the  forefront  of  the  best 
thought  and  the  wisest  action  in  the  matter ; not  to  be  of 
the  number  of  those  who,  ignorant  or  heedless  of  the  plain 
teaching  of  history  and  of  the  elementary  verities  of  social 
science,  run  madly  now  after  one  and  now  after  another 
political  heresy,  abandoning  to-day  what  yesterday  the) 
preached  for  very  truth,  and  to-morrow  denying  and  pro- 
testing against  the  ism  of  to-day,  outgrowing  one  folly 
only  to  grow  into  another.  It  is  for  you  to  contribute  some- 
thing to  national  sanity  on  national  questions ; not  only  to 
be  sane  and  virile  yourselves,  but  also  to  communicate 
your  sanity  and  virility  to  the  commonwealth ; to  be  factors 
in  building  up  and  not  in  pulling  down ; to  set  your  faces 
against  crude  theories  and  hasty  generalization  on  polit- 
ical questions,  and  to  be  no  party  to  the  venting  of  blatant 
nonsense  in  high  places;  to  be  clear  enough  of  mental 
vision  calmly  to  realize,  in  the  face  of  popular  clamor  and 
partisan  clack,  that  a pop-gun,  as  Emerson  phrases  it,  is 
only  a pop-gun,  though  the  ancient  and  honorable  of  the 
earth  proclaim  it  to  be  the  crack  of  doom;  to  gird  up  the 
loins  of  your  minds  against  the  intellectual  follies  of  the 
unthinking  multitude,  who  yesterday  feared  savings-banks 
and  incorporated  companies,  who  to-day  shiver  at  trusts 
and  mergers,  and  who  to-morrow  will  be  possessed  of 
some  new  madness;  to  lay  about  yourselves  lustily  and 
well,  at  the  outset  of  your  several  careers,  to  the  end  that 


you  may  be,  intellectually,  materially  and  morally,  of  the 
elect  order  of  the  “haves”  and  not  of  the  “have-nots” ; that 
you  may  produce  something  in  your  day  and  generation, 
and  acquire  something  good  for  yourselves  and  others,  as 
God  shall  give  you  scope  and  opportunity ; that  you  may, 
in  the  strenuous  existence  of  to-day,  be  something  better 
than  blind  leaders  of  the  blind;  and  that  thus,  in  a broad 
and  comprehensive  sense,  you  may  be  in  life,  as  it  is  given 
you  to  live  it, — not  outsiders,  good  for  nothing,  but  in- 
siders, good  for  something,  for  of  such  is  the  Kingdom  of 
Heaven. 

Charles  F.  Beach,  Jun. 

Pioneer  Press  Building, 

St.  Paul,  Minn.,  Feby.  13,  190*. 


